Correlation Between Cembra Money and National Beverage

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

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

Diversification Opportunities for Cembra Money and National Beverage

0.49

Correlation Coefficient

Cembra Money  National Beverage

Very weak diversification

The 3 months correlation between Cembra and National is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cembra Money Bank 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 Cembra Money 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 Cembra Money Bank 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 Cembra Money i.e., Cembra Money and National Beverage go up and down completely randomly.

Pair Corralation between Cembra Money and National Beverage

Assuming the 90 days trading horizon Cembra Money Bank is expected to generate 0.62 times more return on investment than National Beverage. However, Cembra Money Bank is 1.61 times less risky than National Beverage. It trades about 0.02 of its potential returns per unit of risk. National Beverage Corp is currently generating about -0.21 per unit of risk. If you would invest  8,120  in Cembra Money Bank on September 25, 2024 and sell it today you would earn a total of  35.00  from holding Cembra Money Bank or generate 0.43% return on investment over 90 days.

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

Cembra Money Bank  vs.  National Beverage Corp

Cembra Money Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cembra Money Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cembra Money 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

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 Cembra Money and National Beverage

The main advantage of trading using opposite Cembra Money and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cembra Money 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 Cembra Money Bank 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.