Correlation Between Mercantile Investment and National Beverage

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

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

Diversification Opportunities for Mercantile Investment and National Beverage

0.0

Correlation Coefficient

Mercantile Investment  National Beverage

Pay attention - limited upside

The 3 months correlation between Mercantile and National is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding The Mercantile Investment 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 Mercantile Investment 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 The Mercantile Investment 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 Mercantile Investment i.e., Mercantile Investment and National Beverage go up and down completely randomly.

Pair Corralation between Mercantile Investment and National Beverage

Assuming the 90 days trading horizon Mercantile Investment is expected to generate 2.56 times less return on investment than National Beverage. But when comparing it to its historical volatility, The Mercantile Investment is 3.36 times less risky than National Beverage. It trades about 0.02 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,419  in National Beverage Corp on October 5, 2024 and sell it today you would lose (146.00) from holding National Beverage Corp or give up 3.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	94.97%
Values	Daily Returns

The Mercantile Investment  vs.  National Beverage Corp

The Mercantile Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Mercantile Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Mercantile Investment is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 comparatively stable basic indicators, National Beverage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mercantile Investment and National Beverage

The main advantage of trading using opposite Mercantile Investment and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercantile Investment 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 The Mercantile Investment 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.