Correlation Between National Beverage and Cracker Barrel
Can any of the company-specific risk be diversified away by investing in both National Beverage and Cracker Barrel 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 Cracker Barrel 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 Cracker Barrel Old, you can compare the effects of market volatilities on National Beverage and Cracker Barrel 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 Cracker Barrel. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Cracker Barrel.
Diversification Opportunities for National Beverage and Cracker Barrel
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and Cracker is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Cracker Barrel Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cracker Barrel Old 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 Cracker Barrel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cracker Barrel Old has no effect on the direction of National Beverage i.e., National Beverage and Cracker Barrel go up and down completely randomly.
Pair Corralation between National Beverage and Cracker Barrel
Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Cracker Barrel. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.54 times less risky than Cracker Barrel. The stock trades about -0.03 of its potential returns per unit of risk. The Cracker Barrel Old is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,842 in Cracker Barrel Old on September 18, 2024 and sell it today you would earn a total of 499.00 from holding Cracker Barrel Old or generate 10.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
National Beverage Corp vs. Cracker Barrel Old
Performance |
Timeline |
National Beverage Corp |
Cracker Barrel Old |
National Beverage and Cracker Barrel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with National Beverage and Cracker Barrel
The main advantage of trading using opposite National Beverage and Cracker Barrel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, Cracker Barrel 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 Cracker Barrel will offset losses from the drop in Cracker Barrel's long position.National Beverage vs. Coca Cola Femsa SAB | National Beverage vs. Coca Cola European Partners | National Beverage vs. Coca Cola Consolidated |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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