Correlation Between National Beverage and Take Two

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

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

Diversification Opportunities for National Beverage and Take Two

0.4

Correlation Coefficient

National Beverage  Take Two

Very weak diversification

The 3 months correlation between National and Take is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Take Two Interactive Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Take Two Interactive and National Beverage 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 National Beverage Corp are associated (or correlated) with Take Two. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Take Two Interactive has no effect on the direction of National Beverage i.e., National Beverage and Take Two go up and down completely randomly.

Pair Corralation between National Beverage and Take Two

Assuming the 90 days trading horizon National Beverage Corp is expected to under-perform the Take Two. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.73 times less risky than Take Two. The stock trades about -0.43 of its potential returns per unit of risk. The Take Two Interactive Software is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  18,547  in Take Two Interactive Software on October 11, 2024 and sell it today you would lose (338.00) from holding Take Two Interactive Software or give up 1.82% of portfolio value over 90 days.

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

National Beverage Corp  vs.  Take Two Interactive Software

National Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Beverage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Take Two Interactive

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Take Two unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Take Two

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

The idea behind National Beverage Corp and Take Two Interactive Software 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.