Correlation Between National Beverage and Sinopec Oilfield

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

Diversification Opportunities for National Beverage and Sinopec Oilfield

0.29

Correlation Coefficient

National Beverage  Sinopec Oilfield

Modest diversification

The 3 months correlation between National and Sinopec is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Sinopec Oilfield Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopec Oilfield Service 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 Sinopec Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopec Oilfield Service has no effect on the direction of National Beverage i.e., National Beverage and Sinopec Oilfield go up and down completely randomly.

Pair Corralation between National Beverage and Sinopec Oilfield

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the Sinopec Oilfield. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.83 times less risky than Sinopec Oilfield. The stock trades about -0.07 of its potential returns per unit of risk. The Sinopec Oilfield Service is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7.05  in Sinopec Oilfield Service on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Sinopec Oilfield Service or generate 0.0% return on investment over 90 days.

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

National Beverage Corp  vs.  Sinopec Oilfield Service

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.

Sinopec Oilfield Service

Risk-Adjusted Performance

Weak

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

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

The idea behind National Beverage Corp and Sinopec Oilfield Service 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.