Correlation Between National Beverage and ReTo Eco

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

Diversification Opportunities for National Beverage and ReTo Eco

-0.48

Correlation Coefficient

National Beverage  ReTo Eco

Very good diversification

The 3 months correlation between National and ReTo is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and ReTo Eco Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReTo Eco Solutions 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 ReTo Eco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReTo Eco Solutions has no effect on the direction of National Beverage i.e., National Beverage and ReTo Eco go up and down completely randomly.

Pair Corralation between National Beverage and ReTo Eco

Given the investment horizon of 90 days National Beverage is expected to generate 53.98 times less return on investment than ReTo Eco. But when comparing it to its historical volatility, National Beverage Corp is 24.34 times less risky than ReTo Eco. It trades about 0.02 of its potential returns per unit of risk. ReTo Eco Solutions is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,100  in ReTo Eco Solutions on September 21, 2024 and sell it today you would lose (4,006) from holding ReTo Eco Solutions or give up 97.71% of portfolio value over 90 days.

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

National Beverage Corp  vs.  ReTo Eco Solutions

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.

ReTo Eco Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ReTo Eco Solutions 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 basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with National Beverage and ReTo Eco

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

The idea behind National Beverage Corp and ReTo Eco Solutions 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .