Correlation Between National Beverage and Grocery Outlet

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

Diversification Opportunities for National Beverage and Grocery Outlet

0.72

Correlation Coefficient

National Beverage  Grocery Outlet

Poor diversification

The 3 months correlation between National and Grocery is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Grocery Outlet Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grocery Outlet Holding 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 Grocery Outlet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grocery Outlet Holding has no effect on the direction of National Beverage i.e., National Beverage and Grocery Outlet go up and down completely randomly.

Pair Corralation between National Beverage and Grocery Outlet

Given the investment horizon of 90 days National Beverage Corp is expected to generate 0.58 times more return on investment than Grocery Outlet. However, National Beverage Corp is 1.72 times less risky than Grocery Outlet. It trades about -0.01 of its potential returns per unit of risk. Grocery Outlet Holding is currently generating about -0.02 per unit of risk. If you would invest  4,516  in National Beverage Corp on October 9, 2024 and sell it today you would lose (263.00) from holding National Beverage Corp or give up 5.82% of portfolio value over 90 days.

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

National Beverage Corp  vs.  Grocery Outlet Holding

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.

Grocery Outlet Holding

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Grocery Outlet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with National Beverage and Grocery Outlet

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

The idea behind National Beverage Corp and Grocery Outlet Holding 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.