Correlation Between National Beverage and Smurfit WestRock

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

Diversification Opportunities for National Beverage and Smurfit WestRock

0.67

Correlation Coefficient

National Beverage  Smurfit WestRock

Poor diversification

The 3 months correlation between National and Smurfit is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Smurfit WestRock plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit WestRock plc 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 Smurfit WestRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit WestRock plc has no effect on the direction of National Beverage i.e., National Beverage and Smurfit WestRock go up and down completely randomly.

Pair Corralation between National Beverage and Smurfit WestRock

Given the investment horizon of 90 days National Beverage Corp is expected to generate 1.37 times more return on investment than Smurfit WestRock. However, National Beverage is 1.37 times more volatile than Smurfit WestRock plc. It trades about -0.11 of its potential returns per unit of risk. Smurfit WestRock plc is currently generating about -0.18 per unit of risk. If you would invest  4,787  in National Beverage Corp on September 23, 2024 and sell it today you would lose (250.00) from holding National Beverage Corp or give up 5.22% of portfolio value over 90 days.

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

National Beverage Corp  vs.  Smurfit WestRock plc

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.

Smurfit WestRock plc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit WestRock plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Smurfit WestRock showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Smurfit WestRock

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

The idea behind National Beverage Corp and Smurfit WestRock plc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.