Correlation Between National Beverage and Global Net

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

Diversification Opportunities for National Beverage and Global Net

0.02

Correlation Coefficient

National Beverage  Global Net

Significant diversification

The 3 months correlation between National and Global is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Global Net Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Net Lease 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 Global Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Net Lease has no effect on the direction of National Beverage i.e., National Beverage and Global Net go up and down completely randomly.

Pair Corralation between National Beverage and Global Net

Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Global Net. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.89 times less risky than Global Net. The stock trades about -0.39 of its potential returns per unit of risk. The Global Net Lease is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,284  in Global Net Lease on October 11, 2024 and sell it today you would lose (7.00) from holding Global Net Lease or give up 0.31% of portfolio value over 90 days.

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

National Beverage Corp  vs.  Global Net Lease

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.

Global Net Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Net Lease has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Global Net is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with National Beverage and Global Net

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

The idea behind National Beverage Corp and Global Net Lease 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.