Correlation Between National Beverage and Compass Diversified

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

Diversification Opportunities for National Beverage and Compass Diversified

0.09

Correlation Coefficient

National Beverage  Compass Diversified

Significant diversification

The 3 months correlation between National and Compass is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified 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 Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of National Beverage i.e., National Beverage and Compass Diversified go up and down completely randomly.

Pair Corralation between National Beverage and Compass Diversified

Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Compass Diversified. In addition to that, National Beverage is 1.37 times more volatile than Compass Diversified Holdings. It trades about -0.13 of its total potential returns per unit of risk. Compass Diversified Holdings is currently generating about -0.02 per unit of volatility. If you would invest  2,270  in Compass Diversified Holdings on December 22, 2024 and sell it today you would lose (40.00) from holding Compass Diversified Holdings or give up 1.76% of portfolio value over 90 days.

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

National Beverage Corp  vs.  Compass Diversified Holdings

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 inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Compass Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Diversified Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Compass Diversified is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with National Beverage and Compass Diversified

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

The idea behind National Beverage Corp and Compass Diversified Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.