Correlation Between National Beverage and PLATO GOLD

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

Diversification Opportunities for National Beverage and PLATO GOLD

-0.29

Correlation Coefficient

National Beverage  PLATO GOLD

Very good diversification

The 3 months correlation between National and PLATO is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and PLATO GOLD P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLATO GOLD P 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 PLATO GOLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLATO GOLD P has no effect on the direction of National Beverage i.e., National Beverage and PLATO GOLD go up and down completely randomly.

Pair Corralation between National Beverage and PLATO GOLD

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the PLATO GOLD. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 18.69 times less risky than PLATO GOLD. The stock trades about -0.21 of its potential returns per unit of risk. The PLATO GOLD P is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.65  in PLATO GOLD P on October 21, 2024 and sell it today you would earn a total of  0.35  from holding PLATO GOLD P or generate 53.85% return on investment over 90 days.

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

National Beverage Corp  vs.  PLATO GOLD P

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. Despite nearly stable basic indicators, National Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PLATO GOLD P

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PLATO GOLD P are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PLATO GOLD reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and PLATO GOLD

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

The idea behind National Beverage Corp and PLATO GOLD P 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.