Correlation Between National Beverage and Crimson Wine

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

Diversification Opportunities for National Beverage and Crimson Wine

0.4

Correlation Coefficient

National Beverage  Crimson Wine

Very weak diversification

The 3 months correlation between National and Crimson is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Crimson Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crimson Wine 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 Crimson Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crimson Wine has no effect on the direction of National Beverage i.e., National Beverage and Crimson Wine go up and down completely randomly.

Pair Corralation between National Beverage and Crimson Wine

Given the investment horizon of 90 days National Beverage is expected to generate 1.12 times less return on investment than Crimson Wine. But when comparing it to its historical volatility, National Beverage Corp is 1.84 times less risky than Crimson Wine. It trades about 0.12 of its potential returns per unit of risk. Crimson Wine is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  601.00  in Crimson Wine on August 30, 2024 and sell it today you would earn a total of  60.00  from holding Crimson Wine or generate 9.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

National Beverage Corp  vs.  Crimson Wine

National Beverage Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 9 (%) 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 December 2024.

Crimson Wine

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Crimson Wine are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Crimson Wine may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with National Beverage and Crimson Wine

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

The idea behind National Beverage Corp and Crimson Wine 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.