Correlation Between Sparebank and National Beverage

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

By analyzing existing cross correlation between Sparebank 1 SR and National Beverage Corp, you can compare the effects of market volatilities on Sparebank 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 Sparebank with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and National Beverage.

Diversification Opportunities for Sparebank and National Beverage

0.36

Correlation Coefficient

Sparebank  National Beverage

Weak diversification

The 3 months correlation between Sparebank and National is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR 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 Sparebank 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 Sparebank 1 SR 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 Sparebank i.e., Sparebank and National Beverage go up and down completely randomly.

Pair Corralation between Sparebank and National Beverage

Assuming the 90 days trading horizon Sparebank 1 SR is expected to generate 0.74 times more return on investment than National Beverage. However, Sparebank 1 SR is 1.36 times less risky than National Beverage. It trades about 0.07 of its potential returns per unit of risk. National Beverage Corp is currently generating about -0.1 per unit of risk. If you would invest  14,230  in Sparebank 1 SR on September 21, 2024 and sell it today you would earn a total of  290.00  from holding Sparebank 1 SR or generate 2.04% return on investment over 90 days.

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

Sparebank 1 SR  vs.  National Beverage Corp

Sparebank 1 SR

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Sparebank and National Beverage

The main advantage of trading using opposite Sparebank and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank 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 Sparebank 1 SR 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.