Correlation Between National Beverage and GobiMin

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

Diversification Opportunities for National Beverage and GobiMin

0.23

Correlation Coefficient

National Beverage  GobiMin

Modest diversification

The 3 months correlation between National and GobiMin is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and GobiMin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GobiMin 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 GobiMin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GobiMin has no effect on the direction of National Beverage i.e., National Beverage and GobiMin go up and down completely randomly.

Pair Corralation between National Beverage and GobiMin

Given the investment horizon of 90 days National Beverage Corp is expected to generate 5.3 times more return on investment than GobiMin. However, National Beverage is 5.3 times more volatile than GobiMin. It trades about 0.02 of its potential returns per unit of risk. GobiMin is currently generating about 0.08 per unit of risk. If you would invest  4,542  in National Beverage Corp on September 4, 2024 and sell it today you would earn a total of  410.00  from holding National Beverage Corp or generate 9.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	11.92%
Values	Daily Returns

National Beverage Corp  vs.  GobiMin

National Beverage Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, National Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GobiMin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GobiMin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, GobiMin is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Beverage and GobiMin

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

The idea behind National Beverage Corp and GobiMin 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.