Correlation Between National Beverage and SPORT LISBOA

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

Diversification Opportunities for National Beverage and SPORT LISBOA

0.2

Correlation Coefficient

National Beverage  SPORT LISBOA

Modest diversification

The 3 months correlation between National and SPORT is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and SPORT LISBOA E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORT LISBOA E 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 SPORT LISBOA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORT LISBOA E has no effect on the direction of National Beverage i.e., National Beverage and SPORT LISBOA go up and down completely randomly.

Pair Corralation between National Beverage and SPORT LISBOA

Assuming the 90 days horizon National Beverage Corp is expected to generate 0.87 times more return on investment than SPORT LISBOA. However, National Beverage Corp is 1.15 times less risky than SPORT LISBOA. It trades about 0.02 of its potential returns per unit of risk. SPORT LISBOA E is currently generating about -0.01 per unit of risk. If you would invest  3,685  in National Beverage Corp on October 22, 2024 and sell it today you would earn a total of  455.00  from holding National Beverage Corp or generate 12.35% return on investment over 90 days.

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

National Beverage Corp  vs.  SPORT LISBOA E

National Beverage Corp

Risk-Adjusted Performance

0 of 100

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 nearly stable basic indicators, National Beverage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SPORT LISBOA E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPORT LISBOA E has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SPORT LISBOA 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 SPORT LISBOA

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

The idea behind National Beverage Corp and SPORT LISBOA E 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 Transaction History module to view history of all your transactions and understand their impact on performance.