Correlation Between National Beverage and Nongfu Spring

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

Diversification Opportunities for National Beverage and Nongfu Spring

0.1

Correlation Coefficient

National Beverage  Nongfu Spring

Average diversification

The 3 months correlation between National and Nongfu is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Nongfu Spring Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nongfu Spring 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 Nongfu Spring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nongfu Spring has no effect on the direction of National Beverage i.e., National Beverage and Nongfu Spring go up and down completely randomly.

Pair Corralation between National Beverage and Nongfu Spring

Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Nongfu Spring. In addition to that, National Beverage is 2.34 times more volatile than Nongfu Spring Co. It trades about -0.06 of its total potential returns per unit of risk. Nongfu Spring Co is currently generating about 0.08 per unit of volatility. If you would invest  442.00  in Nongfu Spring Co on December 27, 2024 and sell it today you would earn a total of  15.00  from holding Nongfu Spring Co or generate 3.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

National Beverage Corp  vs.  Nongfu Spring Co

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 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.

Nongfu Spring

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nongfu Spring Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nongfu Spring is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Beverage and Nongfu Spring

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

The idea behind National Beverage Corp and Nongfu Spring Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.