Correlation Between National Beverage and Affiliated Resources

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

Diversification Opportunities for National Beverage and Affiliated Resources

-0.37

Correlation Coefficient

National Beverage  Affiliated Resources

Very good diversification

The 3 months correlation between National and Affiliated is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Affiliated Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affiliated Resources Corp 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 Affiliated Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affiliated Resources Corp has no effect on the direction of National Beverage i.e., National Beverage and Affiliated Resources go up and down completely randomly.

Pair Corralation between National Beverage and Affiliated Resources

Given the investment horizon of 90 days National Beverage is expected to generate 2.99 times less return on investment than Affiliated Resources. But when comparing it to its historical volatility, National Beverage Corp is 4.43 times less risky than Affiliated Resources. It trades about 0.08 of its potential returns per unit of risk. Affiliated Resources Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8.25  in Affiliated Resources Corp on September 12, 2024 and sell it today you would earn a total of  0.70  from holding Affiliated Resources Corp or generate 8.48% return on investment over 90 days.

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

National Beverage Corp  vs.  Affiliated Resources Corp

National Beverage Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, National Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Affiliated Resources Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Affiliated Resources Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Affiliated Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Affiliated Resources

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

The idea behind National Beverage Corp and Affiliated Resources 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.