Correlation Between National Beverage and Check Point

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

Diversification Opportunities for National Beverage and Check Point

-0.25

Correlation Coefficient

National Beverage  Check Point

Very good diversification

The 3 months correlation between National and Check is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software 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 Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of National Beverage i.e., National Beverage and Check Point go up and down completely randomly.

Pair Corralation between National Beverage and Check Point

Assuming the 90 days horizon National Beverage Corp is expected to generate 0.78 times more return on investment than Check Point. However, National Beverage Corp is 1.28 times less risky than Check Point. It trades about -0.01 of its potential returns per unit of risk. Check Point Software is currently generating about -0.02 per unit of risk. If you would invest  4,180  in National Beverage Corp on October 24, 2024 and sell it today you would lose (80.00) from holding National Beverage Corp or give up 1.91% 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.  Check Point Software

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Check Point Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Check Point Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Check Point is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with National Beverage and Check Point

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

The idea behind National Beverage Corp and Check Point Software 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.