Correlation Between Associated British and National Beverage

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

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

Diversification Opportunities for Associated British and National Beverage

0.64

Correlation Coefficient

Associated British  National Beverage

Poor diversification

The 3 months correlation between Associated and National is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods 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 Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and National Beverage go up and down completely randomly.

Pair Corralation between Associated British and National Beverage

Assuming the 90 days trading horizon Associated British Foods is expected to generate 1.03 times more return on investment than National Beverage. However, Associated British is 1.03 times more volatile than National Beverage Corp. It trades about -0.05 of its potential returns per unit of risk. National Beverage Corp is currently generating about -0.08 per unit of risk. If you would invest  2,477  in Associated British Foods on December 31, 2024 and sell it today you would lose (144.00) from holding Associated British Foods or give up 5.81% of portfolio value over 90 days.

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

Associated British Foods  vs.  National Beverage Corp

Associated British Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Associated British is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Associated British and National Beverage

The main advantage of trading using opposite Associated British and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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 Associated British Foods 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.