Correlation Between National Beverage and Zoom Video

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

Diversification Opportunities for National Beverage and Zoom Video

0.68

Correlation Coefficient

National Beverage  Zoom Video

Poor diversification

The 3 months correlation between National and Zoom is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Zoom Video Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoom Video Communications 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 Zoom Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoom Video Communications has no effect on the direction of National Beverage i.e., National Beverage and Zoom Video go up and down completely randomly.

Pair Corralation between National Beverage and Zoom Video

Assuming the 90 days trading horizon National Beverage is expected to generate 3.01 times less return on investment than Zoom Video. In addition to that, National Beverage is 1.81 times more volatile than Zoom Video Communications. It trades about 0.01 of its total potential returns per unit of risk. Zoom Video Communications is currently generating about 0.05 per unit of volatility. If you would invest  6,947  in Zoom Video Communications on September 25, 2024 and sell it today you would earn a total of  1,579  from holding Zoom Video Communications or generate 22.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.81%
Values	Daily Returns

National Beverage Corp  vs.  Zoom Video Communications

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.

Zoom Video Communications

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Zoom Video unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Zoom Video

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

The idea behind National Beverage Corp and Zoom Video Communications 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.