Correlation Between National Beverage and Chesapeake Utilities

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

Diversification Opportunities for National Beverage and Chesapeake Utilities

-0.16

Correlation Coefficient

National Beverage  Chesapeake Utilities

Good diversification

The 3 months correlation between National and Chesapeake is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities 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 Chesapeake Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Utilities has no effect on the direction of National Beverage i.e., National Beverage and Chesapeake Utilities go up and down completely randomly.

Pair Corralation between National Beverage and Chesapeake Utilities

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the Chesapeake Utilities. In addition to that, National Beverage is 1.13 times more volatile than Chesapeake Utilities. It trades about -0.08 of its total potential returns per unit of risk. Chesapeake Utilities is currently generating about 0.02 per unit of volatility. If you would invest  11,540  in Chesapeake Utilities on December 31, 2024 and sell it today you would earn a total of  160.00  from holding Chesapeake Utilities or generate 1.39% 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.  Chesapeake Utilities

National Beverage Corp

Risk-Adjusted Performance

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Chesapeake Utilities

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Utilities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Chesapeake Utilities 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 Chesapeake Utilities

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

The idea behind National Beverage Corp and Chesapeake Utilities 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.