Correlation Between Air Transport and National Beverage

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

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

Diversification Opportunities for Air Transport and National Beverage

0.91

Correlation Coefficient

Air Transport  National Beverage

Almost no diversification

The 3 months correlation between Air and National is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services 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 Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and National Beverage go up and down completely randomly.

Pair Corralation between Air Transport and National Beverage

Assuming the 90 days horizon Air Transport Services is expected to generate 0.3 times more return on investment than National Beverage. However, Air Transport Services is 3.31 times less risky than National Beverage. It trades about 0.08 of its potential returns per unit of risk. National Beverage Corp is currently generating about -0.01 per unit of risk. If you would invest  2,060  in Air Transport Services on September 20, 2024 and sell it today you would earn a total of  20.00  from holding Air Transport Services or generate 0.97% return on investment over 90 days.

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

Air Transport Services  vs.  National Beverage Corp

Air Transport Services

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

National Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 4 (%) 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 Air Transport and National Beverage

The main advantage of trading using opposite Air Transport and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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 Air Transport Services 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.