Correlation Between National Beverage and Marks

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

Diversification Opportunities for National Beverage and Marks

0.38

Correlation Coefficient

National Beverage  Marks

Weak diversification

The 3 months correlation between National and Marks is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Marks and Spencer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marks and Spencer 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 Marks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marks and Spencer has no effect on the direction of National Beverage i.e., National Beverage and Marks go up and down completely randomly.

Pair Corralation between National Beverage and Marks

Assuming the 90 days trading horizon National Beverage is expected to generate 3.32 times less return on investment than Marks. In addition to that, National Beverage is 2.01 times more volatile than Marks and Spencer. It trades about 0.01 of its total potential returns per unit of risk. Marks and Spencer is currently generating about 0.08 per unit of volatility. If you would invest  25,355  in Marks and Spencer on October 22, 2024 and sell it today you would earn a total of  8,095  from holding Marks and Spencer or generate 31.93% return on investment over 90 days.

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

National Beverage Corp  vs.  Marks and Spencer

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.

Marks and Spencer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marks and Spencer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with National Beverage and Marks

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

The idea behind National Beverage Corp and Marks and Spencer 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.