Correlation Between National Beverage and Hurco Companies

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

Diversification Opportunities for National Beverage and Hurco Companies

0.73

Correlation Coefficient

National Beverage  Hurco Companies

Poor diversification

The 3 months correlation between National and Hurco is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Hurco Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hurco Companies 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 Hurco Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hurco Companies has no effect on the direction of National Beverage i.e., National Beverage and Hurco Companies go up and down completely randomly.

Pair Corralation between National Beverage and Hurco Companies

Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Hurco Companies. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.1 times less risky than Hurco Companies. The stock trades about -0.35 of its potential returns per unit of risk. The Hurco Companies is currently generating about -0.28 of returns per unit of risk over similar time horizon. If you would invest  2,247  in Hurco Companies on October 6, 2024 and sell it today you would lose (269.00) from holding Hurco Companies or give up 11.97% 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.  Hurco Companies

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.

Hurco Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hurco Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with National Beverage and Hurco Companies

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

The idea behind National Beverage Corp and Hurco Companies 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.