Correlation Between National Beverage and PREMIER FOODS

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

Diversification Opportunities for National Beverage and PREMIER FOODS

0.51

Correlation Coefficient

National Beverage  PREMIER FOODS

Very weak diversification

The 3 months correlation between National and PREMIER is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and PREMIER FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PREMIER 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 PREMIER FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PREMIER FOODS has no effect on the direction of National Beverage i.e., National Beverage and PREMIER FOODS go up and down completely randomly.

Pair Corralation between National Beverage and PREMIER FOODS

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the PREMIER FOODS. In addition to that, National Beverage is 1.87 times more volatile than PREMIER FOODS. It trades about -0.11 of its total potential returns per unit of risk. PREMIER FOODS is currently generating about 0.13 per unit of volatility. If you would invest  226.00  in PREMIER FOODS on September 24, 2024 and sell it today you would earn a total of  6.00  from holding PREMIER FOODS or generate 2.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

National Beverage Corp  vs.  PREMIER FOODS

National Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 4 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

PREMIER FOODS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PREMIER FOODS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, PREMIER FOODS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with National Beverage and PREMIER FOODS

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

The idea behind National Beverage Corp and PREMIER 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.