Correlation Between National Beverage and Nextera Energy

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

Diversification Opportunities for National Beverage and Nextera Energy

0.37

Correlation Coefficient

National Beverage  Nextera Energy

Weak diversification

The 3 months correlation between National and Nextera is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy 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 Nextera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextera Energy has no effect on the direction of National Beverage i.e., National Beverage and Nextera Energy go up and down completely randomly.

Pair Corralation between National Beverage and Nextera Energy

Given the investment horizon of 90 days National Beverage Corp is expected to generate 1.03 times more return on investment than Nextera Energy. However, National Beverage is 1.03 times more volatile than Nextera Energy. It trades about -0.07 of its potential returns per unit of risk. Nextera Energy is currently generating about -0.15 per unit of risk. If you would invest  4,568  in National Beverage Corp on October 24, 2024 and sell it today you would lose (318.00) from holding National Beverage Corp or give up 6.96% of portfolio value over 90 days.

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

National Beverage Corp  vs.  Nextera Energy

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 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.

Nextera Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextera Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with National Beverage and Nextera Energy

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

The idea behind National Beverage Corp and Nextera Energy 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.