Correlation Between National Beverage and Arkema SA

Can any of the company-specific risk be diversified away by investing in both National Beverage and Arkema SA 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 Arkema SA 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 Arkema SA, you can compare the effects of market volatilities on National Beverage and Arkema SA 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 Arkema SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Arkema SA.

Diversification Opportunities for National Beverage and Arkema SA

0.05

Correlation Coefficient

National Beverage  Arkema SA

Significant diversification

The 3 months correlation between National and Arkema is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Arkema SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkema SA 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 Arkema SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkema SA has no effect on the direction of National Beverage i.e., National Beverage and Arkema SA go up and down completely randomly.

Pair Corralation between National Beverage and Arkema SA

Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Arkema SA. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.14 times less risky than Arkema SA. The stock trades about -0.01 of its potential returns per unit of risk. The Arkema SA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  7,303  in Arkema SA on December 29, 2024 and sell it today you would earn a total of  1,563  from holding Arkema SA or generate 21.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.16%
Values	Daily Returns

National Beverage Corp  vs.  Arkema SA

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. In spite of fairly strong basic indicators, National Beverage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Arkema SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arkema SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Arkema SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Arkema SA

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

The idea behind National Beverage Corp and Arkema SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.