Correlation Between National Beverage and FactSet Research

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

Diversification Opportunities for National Beverage and FactSet Research

0.41

Correlation Coefficient

National Beverage  FactSet Research

Very weak diversification

The 3 months correlation between National and FactSet is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and FactSet Research Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FactSet Research Systems 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 FactSet Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FactSet Research Systems has no effect on the direction of National Beverage i.e., National Beverage and FactSet Research go up and down completely randomly.

Pair Corralation between National Beverage and FactSet Research

Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the FactSet Research. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.25 times less risky than FactSet Research. The stock trades about -0.34 of its potential returns per unit of risk. The FactSet Research Systems is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  49,004  in FactSet Research Systems on October 12, 2024 and sell it today you would lose (3,158) from holding FactSet Research Systems or give up 6.44% 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.  FactSet Research Systems

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.

FactSet Research Systems

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days FactSet Research Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, FactSet Research is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with National Beverage and FactSet Research

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

The idea behind National Beverage Corp and FactSet Research Systems 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.