Correlation Between National Beverage and HONEYWELL

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

Diversification Opportunities for National Beverage and HONEYWELL

0.57

Correlation Coefficient

National Beverage  HONEYWELL

Very weak diversification

The 3 months correlation between National and HONEYWELL is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and HONEYWELL INTL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTL INC 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 HONEYWELL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HONEYWELL INTL INC has no effect on the direction of National Beverage i.e., National Beverage and HONEYWELL go up and down completely randomly.

Pair Corralation between National Beverage and HONEYWELL

Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the HONEYWELL. In addition to that, National Beverage is 1.22 times more volatile than HONEYWELL INTL INC. It trades about -0.08 of its total potential returns per unit of risk. HONEYWELL INTL INC is currently generating about 0.06 per unit of volatility. If you would invest  10,217  in HONEYWELL INTL INC on October 26, 2024 and sell it today you would earn a total of  292.00  from holding HONEYWELL INTL INC or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	64.41%
Values	Daily Returns

National Beverage Corp  vs.  HONEYWELL INTL INC

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 latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

HONEYWELL INTL INC

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with National Beverage and HONEYWELL

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

The idea behind National Beverage Corp and HONEYWELL INTL INC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.