Correlation Between National Beverage and HYDROFARM HLD

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

Diversification Opportunities for National Beverage and HYDROFARM HLD

0.25

Correlation Coefficient

National Beverage  HYDROFARM HLD

Modest diversification

The 3 months correlation between National and HYDROFARM is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and HYDROFARM HLD GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HYDROFARM HLD GRP 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 HYDROFARM HLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HYDROFARM HLD GRP has no effect on the direction of National Beverage i.e., National Beverage and HYDROFARM HLD go up and down completely randomly.

Pair Corralation between National Beverage and HYDROFARM HLD

Assuming the 90 days horizon National Beverage Corp is expected to generate 0.43 times more return on investment than HYDROFARM HLD. However, National Beverage Corp is 2.34 times less risky than HYDROFARM HLD. It trades about -0.11 of its potential returns per unit of risk. HYDROFARM HLD GRP is currently generating about -0.21 per unit of risk. If you would invest  4,560  in National Beverage Corp on September 24, 2024 and sell it today you would lose (200.00) from holding National Beverage Corp or give up 4.39% of portfolio value over 90 days.

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

National Beverage Corp  vs.  HYDROFARM HLD GRP

National Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

HYDROFARM HLD GRP

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with National Beverage and HYDROFARM HLD

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

The idea behind National Beverage Corp and HYDROFARM HLD GRP 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.