Correlation Between Pinnacle West and National Beverage

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

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

Diversification Opportunities for Pinnacle West and National Beverage

0.41

Correlation Coefficient

Pinnacle West  National Beverage

Very weak diversification

The 3 months correlation between Pinnacle and National is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle West Capital 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 Pinnacle West 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 Pinnacle West Capital 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 Pinnacle West i.e., Pinnacle West and National Beverage go up and down completely randomly.

Pair Corralation between Pinnacle West and National Beverage

Assuming the 90 days trading horizon Pinnacle West Capital is expected to generate 0.62 times more return on investment than National Beverage. However, Pinnacle West Capital is 1.61 times less risky than National Beverage. It trades about -0.01 of its potential returns per unit of risk. National Beverage Corp is currently generating about -0.2 per unit of risk. If you would invest  9,306  in Pinnacle West Capital on November 29, 2024 and sell it today you would lose (95.00) from holding Pinnacle West Capital or give up 1.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.94%
Values	Daily Returns

Pinnacle West Capital  vs.  National Beverage Corp

Pinnacle West Capital

Risk-Adjusted Performance

Very Weak

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

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Pinnacle West and National Beverage

The main advantage of trading using opposite Pinnacle West and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle West 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 Pinnacle West Capital 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.