Correlation Between National Beverage and TRAINLINE PLC

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

Diversification Opportunities for National Beverage and TRAINLINE PLC

0.88

Correlation Coefficient

National Beverage  TRAINLINE PLC

Very poor diversification

The 3 months correlation between National and TRAINLINE is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and TRAINLINE PLC LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAINLINE PLC LS 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 TRAINLINE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAINLINE PLC LS has no effect on the direction of National Beverage i.e., National Beverage and TRAINLINE PLC go up and down completely randomly.

Pair Corralation between National Beverage and TRAINLINE PLC

Assuming the 90 days horizon National Beverage Corp is expected to generate 0.41 times more return on investment than TRAINLINE PLC. However, National Beverage Corp is 2.44 times less risky than TRAINLINE PLC. It trades about -0.14 of its potential returns per unit of risk. TRAINLINE PLC LS is currently generating about -0.17 per unit of risk. If you would invest  4,180  in National Beverage Corp on December 25, 2024 and sell it today you would lose (540.00) from holding National Beverage Corp or give up 12.92% of portfolio value over 90 days.

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

National Beverage Corp  vs.  TRAINLINE PLC LS

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

TRAINLINE PLC LS

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRAINLINE PLC LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with National Beverage and TRAINLINE PLC

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

The idea behind National Beverage Corp and TRAINLINE PLC LS 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.