Correlation Between AM EAGLE and National Beverage

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

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

Diversification Opportunities for AM EAGLE and National Beverage

-0.43

Correlation Coefficient

AM EAGLE  National Beverage

Very good diversification

The 3 months correlation between AFG and National is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS 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 AM EAGLE 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 AM EAGLE OUTFITTERS 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 AM EAGLE i.e., AM EAGLE and National Beverage go up and down completely randomly.

Pair Corralation between AM EAGLE and National Beverage

Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to generate 1.45 times more return on investment than National Beverage. However, AM EAGLE is 1.45 times more volatile than National Beverage Corp. It trades about 0.03 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.02 per unit of risk. If you would invest  1,378  in AM EAGLE OUTFITTERS on October 4, 2024 and sell it today you would earn a total of  282.00  from holding AM EAGLE OUTFITTERS or generate 20.46% return on investment over 90 days.

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

AM EAGLE OUTFITTERS  vs.  National Beverage Corp

AM EAGLE OUTFITTERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AM EAGLE OUTFITTERS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

National Beverage Corp

Risk-Adjusted Performance

0 of 100

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 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 AM EAGLE and National Beverage

The main advantage of trading using opposite AM EAGLE and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AM EAGLE 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 AM EAGLE OUTFITTERS 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.