Correlation Between National Beverage and PLAYMATES TOYS

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

Diversification Opportunities for National Beverage and PLAYMATES TOYS

-0.31

Correlation Coefficient

National Beverage  PLAYMATES TOYS

Very good diversification

The 3 months correlation between National and PLAYMATES is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and PLAYMATES TOYS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYMATES TOYS 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 PLAYMATES TOYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYMATES TOYS has no effect on the direction of National Beverage i.e., National Beverage and PLAYMATES TOYS go up and down completely randomly.

Pair Corralation between National Beverage and PLAYMATES TOYS

Assuming the 90 days horizon National Beverage Corp is expected to generate 0.44 times more return on investment than PLAYMATES TOYS. However, National Beverage Corp is 2.26 times less risky than PLAYMATES TOYS. It trades about 0.0 of its potential returns per unit of risk. PLAYMATES TOYS is currently generating about -0.01 per unit of risk. If you would invest  4,080  in National Beverage Corp on October 11, 2024 and sell it today you would lose (40.00) from holding National Beverage Corp or give up 0.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

National Beverage Corp  vs.  PLAYMATES TOYS

National Beverage Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days National Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, National Beverage is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

PLAYMATES TOYS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with National Beverage and PLAYMATES TOYS

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

The idea behind National Beverage Corp and PLAYMATES TOYS 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.