Correlation Between CN MODERN and National Beverage

Can any of the company-specific risk be diversified away by investing in both CN MODERN and National Beverage 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 CN MODERN and National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CN MODERN DAIRY and National Beverage Corp, you can compare the effects of market volatilities on CN MODERN and National Beverage 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 CN MODERN with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and National Beverage.

Diversification Opportunities for CN MODERN and National Beverage

-0.84

Correlation Coefficient

CN MODERN  National Beverage

Pay attention - limited upside

The 3 months correlation between 07M and National is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of CN MODERN i.e., CN MODERN and National Beverage go up and down completely randomly.

Pair Corralation between CN MODERN and National Beverage

Assuming the 90 days trading horizon CN MODERN DAIRY is expected to generate 2.81 times more return on investment than National Beverage. However, CN MODERN is 2.81 times more volatile than National Beverage Corp. It trades about 0.08 of its potential returns per unit of risk. National Beverage Corp is currently generating about -0.08 per unit of risk. If you would invest  11.00  in CN MODERN DAIRY on December 29, 2024 and sell it today you would earn a total of  2.00  from holding CN MODERN DAIRY or generate 18.18% return on investment over 90 days.

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

CN MODERN DAIRY  vs.  National Beverage Corp

CN MODERN DAIRY

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CN MODERN DAIRY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, CN MODERN exhibited solid returns over the last few months and may actually be approaching a breakup point.

National Beverage Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CN MODERN and National Beverage

The main advantage of trading using opposite CN MODERN and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN MODERN position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.

The idea behind CN MODERN DAIRY and National Beverage Corp 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.