Correlation Between National Beverage and Freedom Holding

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

Diversification Opportunities for National Beverage and Freedom Holding

-0.04

Correlation Coefficient

National Beverage  Freedom Holding

Good diversification

The 3 months correlation between National and Freedom is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Freedom Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Holding Corp 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 Freedom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Holding Corp has no effect on the direction of National Beverage i.e., National Beverage and Freedom Holding go up and down completely randomly.

Pair Corralation between National Beverage and Freedom Holding

Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Freedom Holding. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.16 times less risky than Freedom Holding. The stock trades about -0.03 of its potential returns per unit of risk. The Freedom Holding Corp is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  9,814  in Freedom Holding Corp on October 8, 2024 and sell it today you would earn a total of  3,319  from holding Freedom Holding Corp or generate 33.82% return on investment over 90 days.

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

National Beverage Corp  vs.  Freedom Holding Corp

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.

Freedom Holding Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Holding Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Freedom Holding exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Freedom Holding

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

The idea behind National Beverage Corp and Freedom Holding Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.