Correlation Between National Beverage and DALATA HOTEL

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

Diversification Opportunities for National Beverage and DALATA HOTEL

0.8

Correlation Coefficient

National Beverage  DALATA HOTEL

Very poor diversification

The 3 months correlation between National and DALATA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and DALATA HOTEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DALATA HOTEL 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 DALATA HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DALATA HOTEL has no effect on the direction of National Beverage i.e., National Beverage and DALATA HOTEL go up and down completely randomly.

Pair Corralation between National Beverage and DALATA HOTEL

Assuming the 90 days horizon National Beverage Corp is expected to generate 2.18 times more return on investment than DALATA HOTEL. However, National Beverage is 2.18 times more volatile than DALATA HOTEL. It trades about -0.04 of its potential returns per unit of risk. DALATA HOTEL is currently generating about -0.18 per unit of risk. If you would invest  4,460  in National Beverage Corp on September 21, 2024 and sell it today you would lose (80.00) from holding National Beverage Corp or give up 1.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

National Beverage Corp  vs.  DALATA HOTEL

National Beverage Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DALATA HOTEL

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DALATA HOTEL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, DALATA HOTEL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with National Beverage and DALATA HOTEL

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

The idea behind National Beverage Corp and DALATA HOTEL 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 Global Correlations module to find global opportunities by holding instruments from different markets.