Correlation Between National Beverage and BRIT AMER

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

Diversification Opportunities for National Beverage and BRIT AMER

0.71

Correlation Coefficient

National Beverage  BRIT AMER

Poor diversification

The 3 months correlation between National and BRIT is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and BRIT AMER TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRIT AMER TOBACCO 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 BRIT AMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRIT AMER TOBACCO has no effect on the direction of National Beverage i.e., National Beverage and BRIT AMER go up and down completely randomly.

Pair Corralation between National Beverage and BRIT AMER

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the BRIT AMER. In addition to that, National Beverage is 2.23 times more volatile than BRIT AMER TOBACCO. It trades about -0.22 of its total potential returns per unit of risk. BRIT AMER TOBACCO is currently generating about -0.12 per unit of volatility. If you would invest  3,523  in BRIT AMER TOBACCO on September 27, 2024 and sell it today you would lose (68.00) from holding BRIT AMER TOBACCO or give up 1.93% of portfolio value over 90 days.

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

National Beverage Corp  vs.  BRIT AMER TOBACCO

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.

BRIT AMER TOBACCO

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BRIT AMER TOBACCO are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BRIT AMER is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with National Beverage and BRIT AMER

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

The idea behind National Beverage Corp and BRIT AMER TOBACCO 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.