Correlation Between National Beverage and Strategic Investments

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

Diversification Opportunities for National Beverage and Strategic Investments

-0.31

Correlation Coefficient

National Beverage  Strategic Investments

Very good diversification

The 3 months correlation between National and Strategic is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Strategic Investments AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Investments 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 Strategic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Investments has no effect on the direction of National Beverage i.e., National Beverage and Strategic Investments go up and down completely randomly.

Pair Corralation between National Beverage and Strategic Investments

Assuming the 90 days horizon National Beverage Corp is expected to generate 0.35 times more return on investment than Strategic Investments. However, National Beverage Corp is 2.87 times less risky than Strategic Investments. It trades about 0.15 of its potential returns per unit of risk. Strategic Investments AS is currently generating about 0.02 per unit of risk. If you would invest  4,040  in National Beverage Corp on September 3, 2024 and sell it today you would earn a total of  620.00  from holding National Beverage Corp or generate 15.35% 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.  Strategic Investments AS

National Beverage Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, National Beverage reported solid returns over the last few months and may actually be approaching a breakup point.

Strategic Investments

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind National Beverage Corp and Strategic Investments AS 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.