Correlation Between KRISPY KREME and National Beverage

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

By analyzing existing cross correlation between KRISPY KREME DL 01 and National Beverage Corp, you can compare the effects of market volatilities on KRISPY KREME 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 KRISPY KREME with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRISPY KREME and National Beverage.

Diversification Opportunities for KRISPY KREME and National Beverage

0.34

Correlation Coefficient

KRISPY KREME  National Beverage

Weak diversification

The 3 months correlation between KRISPY and National is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding KRISPY KREME DL 01 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 KRISPY KREME 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 KRISPY KREME DL 01 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 KRISPY KREME i.e., KRISPY KREME and National Beverage go up and down completely randomly.

Pair Corralation between KRISPY KREME and National Beverage

Assuming the 90 days horizon KRISPY KREME is expected to generate 3.3 times less return on investment than National Beverage. In addition to that, KRISPY KREME is 1.82 times more volatile than National Beverage Corp. It trades about 0.06 of its total potential returns per unit of risk. National Beverage Corp is currently generating about 0.33 per unit of volatility. If you would invest  4,100  in National Beverage Corp on September 1, 2024 and sell it today you would earn a total of  580.00  from holding National Beverage Corp or generate 14.15% return on investment over 90 days.

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

KRISPY KREME DL 01  vs.  National Beverage Corp

KRISPY KREME DL

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KRISPY KREME DL 01 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KRISPY KREME 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

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Beverage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KRISPY KREME and National Beverage

The main advantage of trading using opposite KRISPY KREME and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KRISPY KREME 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 KRISPY KREME DL 01 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.