Correlation Between National Beverage and Constellation Software

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

Diversification Opportunities for National Beverage and Constellation Software

-0.45

Correlation Coefficient

National Beverage  Constellation Software

Very good diversification

The 3 months correlation between National and Constellation is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software 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 Constellation Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Software has no effect on the direction of National Beverage i.e., National Beverage and Constellation Software go up and down completely randomly.

Pair Corralation between National Beverage and Constellation Software

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the Constellation Software. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.47 times less risky than Constellation Software. The stock trades about -0.14 of its potential returns per unit of risk. The Constellation Software is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  301,000  in Constellation Software on December 25, 2024 and sell it today you would earn a total of  5,000  from holding Constellation Software or generate 1.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

National Beverage Corp  vs.  Constellation Software

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Constellation Software

Risk-Adjusted Performance

Weak

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

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

The idea behind National Beverage Corp and Constellation Software 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.

Check out your portfolio center.

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.