Correlation Between National Beverage and AP Møller

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

Diversification Opportunities for National Beverage and AP Møller

0.8

Correlation Coefficient

National Beverage  AP Møller

Very poor diversification

The 3 months correlation between National and DP4B is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Møller 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 AP Møller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Møller has no effect on the direction of National Beverage i.e., National Beverage and AP Møller go up and down completely randomly.

Pair Corralation between National Beverage and AP Møller

Assuming the 90 days horizon National Beverage is expected to generate 1.19 times less return on investment than AP Møller. But when comparing it to its historical volatility, National Beverage Corp is 1.54 times less risky than AP Møller. It trades about 0.07 of its potential returns per unit of risk. AP Mller is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  143,750  in AP Mller on September 19, 2024 and sell it today you would earn a total of  10,300  from holding AP Mller or generate 7.17% return on investment over 90 days.

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

National Beverage Corp  vs.  AP Mller

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. Despite nearly fragile basic indicators, National Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AP Møller

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AP Møller may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with National Beverage and AP Møller

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

The idea behind National Beverage Corp and AP Mller 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.