Correlation Between National Beverage and Origin Materials

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

Diversification Opportunities for National Beverage and Origin Materials

-0.01

Correlation Coefficient

National Beverage  Origin Materials

Good diversification

The 3 months correlation between National and Origin is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Origin Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Materials 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 Origin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Materials has no effect on the direction of National Beverage i.e., National Beverage and Origin Materials go up and down completely randomly.

Pair Corralation between National Beverage and Origin Materials

Given the investment horizon of 90 days National Beverage is expected to generate 47.2 times less return on investment than Origin Materials. But when comparing it to its historical volatility, National Beverage Corp is 3.61 times less risky than Origin Materials. It trades about 0.01 of its potential returns per unit of risk. Origin Materials is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Origin Materials on October 9, 2024 and sell it today you would earn a total of  61.00  from holding Origin Materials or generate 98.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

National Beverage Corp  vs.  Origin Materials

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.

Origin Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Origin Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with National Beverage and Origin Materials

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

The idea behind National Beverage Corp and Origin Materials 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.