Correlation Between DICKS Sporting and National Beverage

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

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

Diversification Opportunities for DICKS Sporting and National Beverage

0.42

Correlation Coefficient

DICKS Sporting  National Beverage

Very weak diversification

The 3 months correlation between DICKS and National is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding DICKS Sporting Goods 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 DICKS Sporting 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 DICKS Sporting Goods 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 DICKS Sporting i.e., DICKS Sporting and National Beverage go up and down completely randomly.

Pair Corralation between DICKS Sporting and National Beverage

Assuming the 90 days horizon DICKS Sporting Goods is expected to generate 1.4 times more return on investment than National Beverage. However, DICKS Sporting is 1.4 times more volatile than National Beverage Corp. It trades about 0.1 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  10,649  in DICKS Sporting Goods on September 23, 2024 and sell it today you would earn a total of  10,016  from holding DICKS Sporting Goods or generate 94.06% return on investment over 90 days.

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

DICKS Sporting Goods  vs.  National Beverage Corp

DICKS Sporting Goods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DICKS Sporting Goods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DICKS Sporting may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DICKS Sporting and National Beverage

The main advantage of trading using opposite DICKS Sporting and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DICKS Sporting 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 DICKS Sporting Goods 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 Global Correlations module to find global opportunities by holding instruments from different markets.