Correlation Between Applied Materials and National Beverage

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

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

Diversification Opportunities for Applied Materials and National Beverage

-0.43

Correlation Coefficient

Applied Materials  National Beverage

Very good diversification

The 3 months correlation between Applied and National is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and National Beverage go up and down completely randomly.

Pair Corralation between Applied Materials and National Beverage

Assuming the 90 days trading horizon Applied Materials is expected to under-perform the National Beverage. In addition to that, Applied Materials is 1.23 times more volatile than National Beverage Corp. It trades about -0.17 of its total potential returns per unit of risk. National Beverage Corp is currently generating about -0.19 per unit of volatility. If you would invest  4,919  in National Beverage Corp on September 24, 2024 and sell it today you would lose (355.00) from holding National Beverage Corp or give up 7.22% of portfolio value over 90 days.

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

Applied Materials  vs.  National Beverage Corp

Applied Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Materials 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm 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 Applied Materials and National Beverage

The main advantage of trading using opposite Applied Materials and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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 Applied Materials 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.