Correlation Between National Beverage and OBSERVE MEDICAL

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

Diversification Opportunities for National Beverage and OBSERVE MEDICAL

0.0

Correlation Coefficient

National Beverage  OBSERVE MEDICAL

Pay attention - limited upside

The 3 months correlation between National and OBSERVE is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and OBSERVE MEDICAL ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OBSERVE MEDICAL ASA 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 OBSERVE MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OBSERVE MEDICAL ASA has no effect on the direction of National Beverage i.e., National Beverage and OBSERVE MEDICAL go up and down completely randomly.

Pair Corralation between National Beverage and OBSERVE MEDICAL

Assuming the 90 days horizon National Beverage is expected to generate 395.35 times less return on investment than OBSERVE MEDICAL. But when comparing it to its historical volatility, National Beverage Corp is 24.35 times less risky than OBSERVE MEDICAL. It trades about 0.01 of its potential returns per unit of risk. OBSERVE MEDICAL ASA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1.71  in OBSERVE MEDICAL ASA on October 9, 2024 and sell it today you would earn a total of  1.11  from holding OBSERVE MEDICAL ASA or generate 64.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

National Beverage Corp  vs.  OBSERVE MEDICAL ASA

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

OBSERVE MEDICAL ASA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in OBSERVE MEDICAL ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, OBSERVE MEDICAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with National Beverage and OBSERVE MEDICAL

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

The idea behind National Beverage Corp and OBSERVE MEDICAL ASA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.