Correlation Between National Beverage and ESGL Holdings

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

Diversification Opportunities for National Beverage and ESGL Holdings

0.45

Correlation Coefficient

National Beverage  ESGL Holdings

Very weak diversification

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

Pair Corralation between National Beverage and ESGL Holdings

Given the investment horizon of 90 days National Beverage is expected to generate 2799.31 times less return on investment than ESGL Holdings. But when comparing it to its historical volatility, National Beverage Corp is 129.84 times less risky than ESGL Holdings. It trades about 0.01 of its potential returns per unit of risk. ESGL Holdings Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  15,825  in ESGL Holdings Limited on October 4, 2024 and sell it today you would lose (15,824) from holding ESGL Holdings Limited or give up 99.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	84.07%
Values	Daily Returns

National Beverage Corp  vs.  ESGL Holdings Limited

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 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.

ESGL Holdings Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ESGL Holdings Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, ESGL Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and ESGL Holdings

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

The idea behind National Beverage Corp and ESGL Holdings Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.