Correlation Between National Beverage and Sun Life

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

Diversification Opportunities for National Beverage and Sun Life

0.76

Correlation Coefficient

National Beverage  Sun Life

Poor diversification

The 3 months correlation between National and Sun is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Financial 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 Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of National Beverage i.e., National Beverage and Sun Life go up and down completely randomly.

Pair Corralation between National Beverage and Sun Life

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the Sun Life. In addition to that, National Beverage is 1.05 times more volatile than Sun Life Financial. It trades about -0.17 of its total potential returns per unit of risk. Sun Life Financial is currently generating about -0.08 per unit of volatility. If you would invest  5,592  in Sun Life Financial on December 20, 2024 and sell it today you would lose (442.00) from holding Sun Life Financial or give up 7.9% 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.  Sun Life Financial

National Beverage Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sun Life Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sun Life Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with National Beverage and Sun Life

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

The idea behind National Beverage Corp and Sun Life Financial 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.