Correlation Between National Beverage and CAL-MAINE FOODS

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

Diversification Opportunities for National Beverage and CAL-MAINE FOODS

-0.05

Correlation Coefficient

National Beverage  CAL-MAINE FOODS

Good diversification

The 3 months correlation between National and CAL-MAINE is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and CAL MAINE FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAL MAINE FOODS 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 CAL-MAINE FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAL MAINE FOODS has no effect on the direction of National Beverage i.e., National Beverage and CAL-MAINE FOODS go up and down completely randomly.

Pair Corralation between National Beverage and CAL-MAINE FOODS

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the CAL-MAINE FOODS. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.13 times less risky than CAL-MAINE FOODS. The stock trades about -0.15 of its potential returns per unit of risk. The CAL MAINE FOODS is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  8,434  in CAL MAINE FOODS on October 12, 2024 and sell it today you would earn a total of  1,641  from holding CAL MAINE FOODS or generate 19.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

National Beverage Corp  vs.  CAL MAINE FOODS

National Beverage Corp

Risk-Adjusted Performance

0 of 100

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 nearly stable basic indicators, National Beverage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

CAL MAINE FOODS

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CAL MAINE FOODS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CAL-MAINE FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and CAL-MAINE FOODS

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

The idea behind National Beverage Corp and CAL MAINE FOODS 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 Transaction History module to view history of all your transactions and understand their impact on performance.