Correlation Between National Beverage and GMS

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

Diversification Opportunities for National Beverage and GMS

0.45

Correlation Coefficient

National Beverage  GMS

Very weak diversification

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

Pair Corralation between National Beverage and GMS

Given the investment horizon of 90 days National Beverage Corp is expected to generate 0.86 times more return on investment than GMS. However, National Beverage Corp is 1.16 times less risky than GMS. It trades about -0.06 of its potential returns per unit of risk. GMS Inc is currently generating about -0.09 per unit of risk. If you would invest  4,292  in National Beverage Corp on December 27, 2024 and sell it today you would lose (245.00) from holding National Beverage Corp or give up 5.71% 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.  GMS Inc

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 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.

GMS Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days GMS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with National Beverage and GMS

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

The idea behind National Beverage Corp and GMS Inc 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.