Correlation Between National Beverage and CNH Industrial

Can any of the company-specific risk be diversified away by investing in both National Beverage and CNH Industrial 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 CNH Industrial 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 CNH Industrial NV, you can compare the effects of market volatilities on National Beverage and CNH Industrial 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 CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and CNH Industrial.

Diversification Opportunities for National Beverage and CNH Industrial

0.37

Correlation Coefficient

National Beverage  CNH Industrial

Weak diversification

The 3 months correlation between National and CNH is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV 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 CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of National Beverage i.e., National Beverage and CNH Industrial go up and down completely randomly.

Pair Corralation between National Beverage and CNH Industrial

Assuming the 90 days trading horizon National Beverage Corp is expected to generate 1.27 times more return on investment than CNH Industrial. However, National Beverage is 1.27 times more volatile than CNH Industrial NV. It trades about 0.02 of its potential returns per unit of risk. CNH Industrial NV is currently generating about -0.01 per unit of risk. If you would invest  4,419  in National Beverage Corp on October 11, 2024 and sell it today you would lose (75.00) from holding National Beverage Corp or give up 1.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.71%
Values	Daily Returns

National Beverage Corp  vs.  CNH Industrial NV

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.

CNH Industrial NV

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CNH Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with National Beverage and CNH Industrial

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

The idea behind National Beverage Corp and CNH Industrial NV 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.