Correlation Between National Beverage and Alkemy Capital

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

Diversification Opportunities for National Beverage and Alkemy Capital

0.68

Correlation Coefficient

National Beverage  Alkemy Capital

Poor diversification

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

Pair Corralation between National Beverage and Alkemy Capital

Assuming the 90 days trading horizon National Beverage is expected to generate 22.32 times less return on investment than Alkemy Capital. But when comparing it to its historical volatility, National Beverage Corp is 9.16 times less risky than Alkemy Capital. It trades about 0.07 of its potential returns per unit of risk. Alkemy Capital Investments is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,000  in Alkemy Capital Investments on September 17, 2024 and sell it today you would earn a total of  9,750  from holding Alkemy Capital Investments or generate 243.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

National Beverage Corp  vs.  Alkemy Capital Investments

National Beverage Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, National Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alkemy Capital Inves

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alkemy Capital Investments are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Alkemy Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Alkemy Capital

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

The idea behind National Beverage Corp and Alkemy Capital Investments 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.