Correlation Between National Beverage and MSP Recovery

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

Diversification Opportunities for National Beverage and MSP Recovery

-0.26

Correlation Coefficient

National Beverage  MSP Recovery

Very good diversification

The 3 months correlation between National and MSP is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and MSP Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Recovery 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 MSP Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Recovery has no effect on the direction of National Beverage i.e., National Beverage and MSP Recovery go up and down completely randomly.

Pair Corralation between National Beverage and MSP Recovery

Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the MSP Recovery. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 7.03 times less risky than MSP Recovery. The stock trades about -0.13 of its potential returns per unit of risk. The MSP Recovery is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  179.00  in MSP Recovery on December 20, 2024 and sell it today you would lose (35.00) from holding MSP Recovery or give up 19.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

National Beverage Corp  vs.  MSP Recovery

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 latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

MSP Recovery

Risk-Adjusted Performance

Very Weak

Over the last 90 days MSP Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, MSP Recovery is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with National Beverage and MSP Recovery

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

The idea behind National Beverage Corp and MSP Recovery 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.