Correlation Between National Beverage and Advanced Micro

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

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

Diversification Opportunities for National Beverage and Advanced Micro

0.45

Correlation Coefficient

National Beverage  Advanced Micro

Very weak diversification

The 3 months correlation between National and Advanced is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices and National Beverage 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 National Beverage Corp are associated (or correlated) with Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of National Beverage i.e., National Beverage and Advanced Micro go up and down completely randomly.

Pair Corralation between National Beverage and Advanced Micro

Given the investment horizon of 90 days National Beverage Corp is expected to generate 0.61 times more return on investment than Advanced Micro. However, National Beverage Corp is 1.64 times less risky than Advanced Micro. It trades about -0.02 of its potential returns per unit of risk. Advanced Micro Devices is currently generating about -0.04 per unit of risk. If you would invest  4,746  in National Beverage Corp on October 22, 2024 and sell it today you would lose (496.00) from holding National Beverage Corp or give up 10.45% of portfolio value over 90 days.

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

National Beverage Corp  vs.  Advanced Micro Devices

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. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Advanced Micro Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Micro Devices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with National Beverage and Advanced Micro

The main advantage of trading using opposite National Beverage and Advanced Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, Advanced Micro 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 Advanced Micro will offset losses from the drop in Advanced Micro's long position.

The idea behind National Beverage Corp and Advanced Micro Devices 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.