Correlation Between GEN Restaurant and National Beverage

Can any of the company-specific risk be diversified away by investing in both GEN Restaurant and National Beverage 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 GEN Restaurant and National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GEN Restaurant Group, and National Beverage Corp, you can compare the effects of market volatilities on GEN Restaurant and National Beverage 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 GEN Restaurant with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEN Restaurant and National Beverage.

Diversification Opportunities for GEN Restaurant and National Beverage

0.27

Correlation Coefficient

GEN Restaurant  National Beverage

Modest diversification

The 3 months correlation between GEN and National is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding GEN Restaurant Group, and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp and GEN Restaurant 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 GEN Restaurant Group, are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of GEN Restaurant i.e., GEN Restaurant and National Beverage go up and down completely randomly.

Pair Corralation between GEN Restaurant and National Beverage

Given the investment horizon of 90 days GEN Restaurant Group, is expected to generate 29.22 times more return on investment than National Beverage. However, GEN Restaurant is 29.22 times more volatile than National Beverage Corp. It trades about 0.05 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.01 per unit of risk. If you would invest  0.00  in GEN Restaurant Group, on September 19, 2024 and sell it today you would earn a total of  790.00  from holding GEN Restaurant Group, or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.15%
Values	Daily Returns

GEN Restaurant Group,  vs.  National Beverage Corp

GEN Restaurant Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEN Restaurant Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, GEN Restaurant is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

National Beverage Corp

Risk-Adjusted Performance

0 of 100

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GEN Restaurant and National Beverage

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

The idea behind GEN Restaurant Group, and National Beverage Corp 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.