Correlation Between National Beverage and COSTCO WHOLESALE

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

Diversification Opportunities for National Beverage and COSTCO WHOLESALE

0.65

Correlation Coefficient

National Beverage  COSTCO WHOLESALE

Poor diversification

The 3 months correlation between National and COSTCO is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and COSTCO WHOLESALE CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSTCO WHOLESALE CDR has no effect on the direction of National Beverage i.e., National Beverage and COSTCO WHOLESALE go up and down completely randomly.

Pair Corralation between National Beverage and COSTCO WHOLESALE

Assuming the 90 days horizon National Beverage Corp is expected to generate 1.16 times more return on investment than COSTCO WHOLESALE. However, National Beverage is 1.16 times more volatile than COSTCO WHOLESALE CDR. It trades about -0.15 of its potential returns per unit of risk. COSTCO WHOLESALE CDR is currently generating about -0.31 per unit of risk. If you would invest  4,420  in National Beverage Corp on October 17, 2024 and sell it today you would lose (180.00) from holding National Beverage Corp or give up 4.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

National Beverage Corp  vs.  COSTCO WHOLESALE CDR

National Beverage Corp

Risk-Adjusted Performance

1 of 100

Weak

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

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, COSTCO WHOLESALE 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 COSTCO WHOLESALE

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

The idea behind National Beverage Corp and COSTCO WHOLESALE CDR 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.