Correlation Between National Beverage and IBEX Technologies

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

Diversification Opportunities for National Beverage and IBEX Technologies

0.67

Correlation Coefficient

National Beverage  IBEX Technologies

Poor diversification

The 3 months correlation between National and IBEX is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and IBEX Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBEX Technologies 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 IBEX Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBEX Technologies has no effect on the direction of National Beverage i.e., National Beverage and IBEX Technologies go up and down completely randomly.

Pair Corralation between National Beverage and IBEX Technologies

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the IBEX Technologies. In addition to that, National Beverage is 1.28 times more volatile than IBEX Technologies. It trades about -0.11 of its total potential returns per unit of risk. IBEX Technologies is currently generating about -0.04 per unit of volatility. If you would invest  69,400  in IBEX Technologies on September 24, 2024 and sell it today you would lose (1,000.00) from holding IBEX Technologies or give up 1.44% of portfolio value over 90 days.

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

National Beverage Corp  vs.  IBEX Technologies

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.

IBEX Technologies

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind National Beverage Corp and IBEX Technologies 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.