Correlation Between National Beverage and Hooker Furniture

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

Diversification Opportunities for National Beverage and Hooker Furniture

0.73

Correlation Coefficient

National Beverage  Hooker Furniture

Poor diversification

The 3 months correlation between National and Hooker is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture 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 Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of National Beverage i.e., National Beverage and Hooker Furniture go up and down completely randomly.

Pair Corralation between National Beverage and Hooker Furniture

Given the investment horizon of 90 days National Beverage is expected to generate 2.16 times less return on investment than Hooker Furniture. But when comparing it to its historical volatility, National Beverage Corp is 1.53 times less risky than Hooker Furniture. It trades about 0.02 of its potential returns per unit of risk. Hooker Furniture is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,376  in Hooker Furniture on September 24, 2024 and sell it today you would earn a total of  76.00  from holding Hooker Furniture or generate 5.52% return on investment over 90 days.

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

National Beverage Corp  vs.  Hooker Furniture

National Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, National Beverage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Hooker Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hooker Furniture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with National Beverage and Hooker Furniture

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

The idea behind National Beverage Corp and Hooker Furniture 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.