Correlation Between National Beverage and NVIDIA

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

Diversification Opportunities for National Beverage and NVIDIA

0.22

Correlation Coefficient

National Beverage  NVIDIA

Modest diversification

The 3 months correlation between National and NVIDIA is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of National Beverage i.e., National Beverage and NVIDIA go up and down completely randomly.

Pair Corralation between National Beverage and NVIDIA

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the NVIDIA. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.68 times less risky than NVIDIA. The stock trades about -0.18 of its potential returns per unit of risk. The NVIDIA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  13,078  in NVIDIA on October 10, 2024 and sell it today you would earn a total of  662.00  from holding NVIDIA or generate 5.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

National Beverage Corp  vs.  NVIDIA

National Beverage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 1 (%) 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.

NVIDIA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, NVIDIA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and NVIDIA

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

The idea behind National Beverage Corp and NVIDIA 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.