Correlation Between Rocky Mountain and National Beverage

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

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

Diversification Opportunities for Rocky Mountain and National Beverage

-0.27

Correlation Coefficient

Rocky Mountain  National Beverage

Very good diversification

The 3 months correlation between Rocky and National is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain High 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 Rocky Mountain 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 Rocky Mountain High 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 Rocky Mountain i.e., Rocky Mountain and National Beverage go up and down completely randomly.

Pair Corralation between Rocky Mountain and National Beverage

Given the investment horizon of 90 days Rocky Mountain High is expected to generate 15.58 times more return on investment than National Beverage. However, Rocky Mountain is 15.58 times more volatile than National Beverage Corp. It trades about 0.14 of its potential returns per unit of risk. National Beverage Corp is currently generating about -0.12 per unit of risk. If you would invest  0.72  in Rocky Mountain High on September 13, 2024 and sell it today you would lose (0.02) from holding Rocky Mountain High or give up 2.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Rocky Mountain High  vs.  National Beverage Corp

Rocky Mountain High

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Mountain High are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Rocky Mountain sustained solid returns over the last few months and may actually be approaching a breakup point.

National Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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 Rocky Mountain and National Beverage

The main advantage of trading using opposite Rocky Mountain and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Mountain 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 Rocky Mountain High 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.