Correlation Between National Beverage and Hongli Group

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

Diversification Opportunities for National Beverage and Hongli Group

-0.35

Correlation Coefficient

National Beverage  Hongli Group

Very good diversification

The 3 months correlation between National and Hongli is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Hongli Group Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongli Group Ordinary 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 Hongli Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongli Group Ordinary has no effect on the direction of National Beverage i.e., National Beverage and Hongli Group go up and down completely randomly.

Pair Corralation between National Beverage and Hongli Group

Given the investment horizon of 90 days National Beverage Corp is expected to generate 0.33 times more return on investment than Hongli Group. However, National Beverage Corp is 3.05 times less risky than Hongli Group. It trades about 0.06 of its potential returns per unit of risk. Hongli Group Ordinary is currently generating about -0.06 per unit of risk. If you would invest  4,449  in National Beverage Corp on September 13, 2024 and sell it today you would earn a total of  232.00  from holding National Beverage Corp or generate 5.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

National Beverage Corp  vs.  Hongli Group Ordinary

National Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, National Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hongli Group Ordinary

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hongli Group Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with National Beverage and Hongli Group

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

The idea behind National Beverage Corp and Hongli Group Ordinary 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.