Correlation Between National Beverage and ArcelorMittal

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

Diversification Opportunities for National Beverage and ArcelorMittal

0.76

Correlation Coefficient

National Beverage  ArcelorMittal

Poor diversification

The 3 months correlation between National and ArcelorMittal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and ArcelorMittal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal has no effect on the direction of National Beverage i.e., National Beverage and ArcelorMittal go up and down completely randomly.

Pair Corralation between National Beverage and ArcelorMittal

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the ArcelorMittal. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.18 times less risky than ArcelorMittal. The stock trades about -0.12 of its potential returns per unit of risk. The ArcelorMittal is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,396  in ArcelorMittal on September 12, 2024 and sell it today you would lose (16.00) from holding ArcelorMittal or give up 0.67% of portfolio value over 90 days.

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

National Beverage Corp  vs.  ArcelorMittal

National Beverage Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ArcelorMittal

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and ArcelorMittal

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

The idea behind National Beverage Corp and ArcelorMittal 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.