Correlation Between National Beverage and Sea

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

Diversification Opportunities for National Beverage and Sea

0.65

Correlation Coefficient

National Beverage  Sea

Poor diversification

The 3 months correlation between National and Sea is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of National Beverage i.e., National Beverage and Sea go up and down completely randomly.

Pair Corralation between National Beverage and Sea

Given the investment horizon of 90 days National Beverage is expected to generate 4.95 times less return on investment than Sea. But when comparing it to its historical volatility, National Beverage Corp is 1.47 times less risky than Sea. It trades about 0.05 of its potential returns per unit of risk. Sea is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  10,019  in Sea on September 13, 2024 and sell it today you would earn a total of  1,648  from holding Sea or generate 16.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

National Beverage Corp  vs.  Sea

National Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, National Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sea

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Sea

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

The idea behind National Beverage Corp and Sea 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.