Correlation Between National Beverage and Unilever PLC

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

Diversification Opportunities for National Beverage and Unilever PLC

-0.66

Correlation Coefficient

National Beverage  Unilever PLC

Excellent diversification

The 3 months correlation between National and Unilever is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC 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 Unilever PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever PLC has no effect on the direction of National Beverage i.e., National Beverage and Unilever PLC go up and down completely randomly.

Pair Corralation between National Beverage and Unilever PLC

Assuming the 90 days horizon National Beverage Corp is expected to generate 1.15 times more return on investment than Unilever PLC. However, National Beverage is 1.15 times more volatile than Unilever PLC. It trades about 0.12 of its potential returns per unit of risk. Unilever PLC is currently generating about -0.06 per unit of risk. If you would invest  3,980  in National Beverage Corp on September 13, 2024 and sell it today you would earn a total of  500.00  from holding National Beverage Corp or generate 12.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

National Beverage Corp  vs.  Unilever PLC

National Beverage Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Unilever PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind National Beverage Corp and Unilever PLC 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.