Correlation Between National Beverage and Werner Enterprises

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

Diversification Opportunities for National Beverage and Werner Enterprises

0.95

Correlation Coefficient

National Beverage  Werner Enterprises

Almost no diversification

The 3 months correlation between National and Werner is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Werner Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Werner Enterprises 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 Werner Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Werner Enterprises has no effect on the direction of National Beverage i.e., National Beverage and Werner Enterprises go up and down completely randomly.

Pair Corralation between National Beverage and Werner Enterprises

Assuming the 90 days horizon National Beverage is expected to generate 1.45 times less return on investment than Werner Enterprises. But when comparing it to its historical volatility, National Beverage Corp is 1.16 times less risky than Werner Enterprises. It trades about 0.09 of its potential returns per unit of risk. Werner Enterprises is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,246  in Werner Enterprises on September 12, 2024 and sell it today you would earn a total of  434.00  from holding Werner Enterprises or generate 13.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

National Beverage Corp  vs.  Werner Enterprises

National Beverage Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 7 (%) 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.

Werner Enterprises

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Werner Enterprises are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Werner Enterprises reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Werner Enterprises

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

The idea behind National Beverage Corp and Werner Enterprises 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.