Correlation Between Nu Skin and Herbalife Nutrition

Can any of the company-specific risk be diversified away by investing in both Nu Skin and Herbalife Nutrition at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nu Skin and Herbalife Nutrition into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nu Skin Enterprises and Herbalife Nutrition, you can compare the effects of market volatilities on Nu Skin and Herbalife Nutrition and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nu Skin with a short position of Herbalife Nutrition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nu Skin and Herbalife Nutrition.

Diversification Opportunities for Nu Skin and Herbalife Nutrition

0.81

Correlation Coefficient

Nu Skin  Herbalife Nutrition

Very poor diversification

The 3 months correlation between NUS and Herbalife is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Nu Skin Enterprises and Herbalife Nutrition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herbalife Nutrition and Nu Skin is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nu Skin Enterprises are associated (or correlated) with Herbalife Nutrition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herbalife Nutrition has no effect on the direction of Nu Skin i.e., Nu Skin and Herbalife Nutrition go up and down completely randomly.

Pair Corralation between Nu Skin and Herbalife Nutrition

Considering the 90-day investment horizon Nu Skin is expected to generate 2.65 times less return on investment than Herbalife Nutrition. But when comparing it to its historical volatility, Nu Skin Enterprises is 1.78 times less risky than Herbalife Nutrition. It trades about 0.16 of its potential returns per unit of risk. Herbalife Nutrition is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  714.00  in Herbalife Nutrition on August 10, 2024 and sell it today you would earn a total of  123.00  from holding Herbalife Nutrition or generate 17.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Nu Skin Enterprises  vs.  Herbalife Nutrition

Nu Skin Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nu Skin Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Herbalife Nutrition

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Herbalife Nutrition are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Herbalife Nutrition may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Nu Skin and Herbalife Nutrition

The main advantage of trading using opposite Nu Skin and Herbalife Nutrition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nu Skin position performs unexpectedly, Herbalife Nutrition can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Herbalife Nutrition will offset losses from the drop in Herbalife Nutrition's long position.

The idea behind Nu Skin Enterprises and Herbalife Nutrition pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.