Correlation Between Ross Stores and National Beverage

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

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

Diversification Opportunities for Ross Stores and National Beverage

0.64

Correlation Coefficient

Ross Stores  National Beverage

Poor diversification

The 3 months correlation between Ross and National is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores 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 Ross Stores 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 Ross Stores 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 Ross Stores i.e., Ross Stores and National Beverage go up and down completely randomly.

Pair Corralation between Ross Stores and National Beverage

Given the investment horizon of 90 days Ross Stores is expected to under-perform the National Beverage. But the stock apears to be less risky and, when comparing its historical volatility, Ross Stores is 1.09 times less risky than National Beverage. The stock trades about -0.2 of its potential returns per unit of risk. The National Beverage Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,250  in National Beverage Corp on December 28, 2024 and sell it today you would lose (61.00) from holding National Beverage Corp or give up 1.44% of portfolio value over 90 days.

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

Ross Stores  vs.  National Beverage Corp

Ross Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ross Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Ross Stores and National Beverage

The main advantage of trading using opposite Ross Stores and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores 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 Ross Stores 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.