Correlation Between National Beverage and COFACE SA

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

Diversification Opportunities for National Beverage and COFACE SA

-0.41

Correlation Coefficient

National Beverage  COFACE SA

Very good diversification

The 3 months correlation between National and COFACE is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and COFACE SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COFACE SA 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 COFACE SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COFACE SA has no effect on the direction of National Beverage i.e., National Beverage and COFACE SA go up and down completely randomly.

Pair Corralation between National Beverage and COFACE SA

Assuming the 90 days horizon National Beverage Corp is expected to generate 1.39 times more return on investment than COFACE SA. However, National Beverage is 1.39 times more volatile than COFACE SA. It trades about 0.03 of its potential returns per unit of risk. COFACE SA is currently generating about 0.03 per unit of risk. If you would invest  4,160  in National Beverage Corp on September 24, 2024 and sell it today you would earn a total of  200.00  from holding National Beverage Corp or generate 4.81% return on investment over 90 days.

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

National Beverage Corp  vs.  COFACE SA

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.

COFACE SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with National Beverage and COFACE SA

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

The idea behind National Beverage Corp and COFACE SA 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.