Correlation Between National Beverage and INTER CARS

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

Diversification Opportunities for National Beverage and INTER CARS

-0.19

Correlation Coefficient

National Beverage  INTER CARS

Good diversification

The 3 months correlation between National and INTER is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS 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 INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of National Beverage i.e., National Beverage and INTER CARS go up and down completely randomly.

Pair Corralation between National Beverage and INTER CARS

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the INTER CARS. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.24 times less risky than INTER CARS. The stock trades about -0.07 of its potential returns per unit of risk. The INTER CARS SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  12,580  in INTER CARS SA on September 29, 2024 and sell it today you would lose (900.00) from holding INTER CARS SA or give up 7.15% of portfolio value over 90 days.

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

National Beverage Corp  vs.  INTER CARS SA

National Beverage Corp

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 1 (%) 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.

INTER CARS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INTER CARS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, INTER CARS 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 INTER CARS

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

The idea behind National Beverage Corp and INTER CARS 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.