Correlation Between National Beverage and SBC Medical

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

Diversification Opportunities for National Beverage and SBC Medical

0.39

Correlation Coefficient

National Beverage  SBC Medical

Weak diversification

The 3 months correlation between National and SBC is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and SBC Medical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBC Medical Group 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 SBC Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBC Medical Group has no effect on the direction of National Beverage i.e., National Beverage and SBC Medical go up and down completely randomly.

Pair Corralation between National Beverage and SBC Medical

Given the investment horizon of 90 days National Beverage is expected to generate 131.98 times less return on investment than SBC Medical. But when comparing it to its historical volatility, National Beverage Corp is 7.22 times less risky than SBC Medical. It trades about 0.01 of its potential returns per unit of risk. SBC Medical Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7.31  in SBC Medical Group on October 4, 2024 and sell it today you would earn a total of  16.79  from holding SBC Medical Group or generate 229.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	15.12%
Values	Daily Returns

National Beverage Corp  vs.  SBC Medical Group

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.

SBC Medical Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SBC Medical Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SBC Medical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and SBC Medical

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

The idea behind National Beverage Corp and SBC Medical Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.