Correlation Between National Beverage and Timken

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

Diversification Opportunities for National Beverage and Timken

-0.68

Correlation Coefficient

National Beverage  Timken

Excellent diversification

The 3 months correlation between National and Timken is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of National Beverage i.e., National Beverage and Timken go up and down completely randomly.

Pair Corralation between National Beverage and Timken

Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Timken. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.13 times less risky than Timken. The stock trades about -0.01 of its potential returns per unit of risk. The Timken Company is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,058  in Timken Company on December 29, 2024 and sell it today you would earn a total of  321.00  from holding Timken Company or generate 4.55% return on investment over 90 days.

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

National Beverage Corp  vs.  Timken Company

National Beverage Corp

Risk-Adjusted Performance

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.

Timken Company

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Timken Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with National Beverage and Timken

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

The idea behind National Beverage Corp and Timken Company 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.