Correlation Between MTY Food and National Beverage

Can any of the company-specific risk be diversified away by investing in both MTY Food and National Beverage 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 MTY Food and National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MTY Food Group and National Beverage Corp, you can compare the effects of market volatilities on MTY Food and National Beverage 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 MTY Food with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTY Food and National Beverage.

Diversification Opportunities for MTY Food and National Beverage

0.71

Correlation Coefficient

MTY Food  National Beverage

Poor diversification

The 3 months correlation between MTY and National is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding MTY Food Group and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp and MTY Food 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 MTY Food Group are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of MTY Food i.e., MTY Food and National Beverage go up and down completely randomly.

Pair Corralation between MTY Food and National Beverage

Assuming the 90 days horizon MTY Food Group is expected to under-perform the National Beverage. But the stock apears to be less risky and, when comparing its historical volatility, MTY Food Group is 1.08 times less risky than National Beverage. The stock trades about -0.02 of its potential returns per unit of risk. The National Beverage Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,594  in National Beverage Corp on October 10, 2024 and sell it today you would earn a total of  546.00  from holding National Beverage Corp or generate 15.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

MTY Food Group  vs.  National Beverage Corp

MTY Food Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MTY Food Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MTY Food is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

National Beverage Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, National Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MTY Food and National Beverage

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

The idea behind MTY Food Group and National Beverage Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.