Correlation Between National Beverage and USU Software

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

Diversification Opportunities for National Beverage and USU Software

-0.8

Correlation Coefficient

National Beverage  USU Software

Pay attention - limited upside

The 3 months correlation between National and USU is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and USU Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USU Software AG 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 USU Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USU Software AG has no effect on the direction of National Beverage i.e., National Beverage and USU Software go up and down completely randomly.

Pair Corralation between National Beverage and USU Software

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the USU Software. In addition to that, National Beverage is 1.15 times more volatile than USU Software AG. It trades about -0.08 of its total potential returns per unit of risk. USU Software AG is currently generating about 0.07 per unit of volatility. If you would invest  2,150  in USU Software AG on December 29, 2024 and sell it today you would earn a total of  110.00  from holding USU Software AG or generate 5.12% return on investment over 90 days.

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

National Beverage Corp  vs.  USU Software AG

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 latest fragile 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.

USU Software AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in USU Software AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, USU Software 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 USU Software

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

The idea behind National Beverage Corp and USU Software AG 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.