Correlation Between National Beverage and Arca Continental

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

Diversification Opportunities for National Beverage and Arca Continental

-0.59

Correlation Coefficient

National Beverage  Arca Continental

Excellent diversification

The 3 months correlation between National and Arca is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB 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 Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of National Beverage i.e., National Beverage and Arca Continental go up and down completely randomly.

Pair Corralation between National Beverage and Arca Continental

Given the investment horizon of 90 days National Beverage Corp is expected to generate 0.71 times more return on investment than Arca Continental. However, National Beverage Corp is 1.42 times less risky than Arca Continental. It trades about 0.03 of its potential returns per unit of risk. Arca Continental SAB is currently generating about -0.03 per unit of risk. If you would invest  4,565  in National Beverage Corp on September 17, 2024 and sell it today you would earn a total of  104.00  from holding National Beverage Corp or generate 2.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

National Beverage Corp  vs.  Arca Continental SAB

National Beverage Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 2 (%) 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.

Arca Continental SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arca Continental SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Arca Continental is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Beverage and Arca Continental

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

The idea behind National Beverage Corp and Arca Continental SAB 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.