Correlation Between National Beverage and Afya

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

Diversification Opportunities for National Beverage and Afya

0.26

Correlation Coefficient

National Beverage  Afya

Modest diversification

The 3 months correlation between National and Afya is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya 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 Afya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afya has no effect on the direction of National Beverage i.e., National Beverage and Afya go up and down completely randomly.

Pair Corralation between National Beverage and Afya

Given the investment horizon of 90 days National Beverage Corp is expected to generate 0.86 times more return on investment than Afya. However, National Beverage Corp is 1.16 times less risky than Afya. It trades about 0.05 of its potential returns per unit of risk. Afya is currently generating about -0.04 per unit of risk. If you would invest  4,451  in National Beverage Corp on September 16, 2024 and sell it today you would earn a total of  218.00  from holding National Beverage Corp or generate 4.9% return on investment over 90 days.

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

National Beverage Corp  vs.  Afya

National Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, National Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Afya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Afya is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with National Beverage and Afya

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

The idea behind National Beverage Corp and Afya 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.