Correlation Between National Beverage and National Bank

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

Diversification Opportunities for National Beverage and National Bank

0.81

Correlation Coefficient

National Beverage  National Bank

Very poor diversification

The 3 months correlation between National and National is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of National Beverage i.e., National Beverage and National Bank go up and down completely randomly.

Pair Corralation between National Beverage and National Bank

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the National Bank. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.39 times less risky than National Bank. The stock trades about -0.02 of its potential returns per unit of risk. The National Bank Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,094  in National Bank Holdings on October 25, 2024 and sell it today you would earn a total of  46.00  from holding National Bank Holdings or generate 1.12% return on investment over 90 days.

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

National Beverage Corp  vs.  National Bank Holdings

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.

National Bank Holdings

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind National Beverage Corp and National Bank Holdings 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.