Correlation Between National Beverage and Zapata Computing

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

Diversification Opportunities for National Beverage and Zapata Computing

-0.57

Correlation Coefficient

National Beverage  Zapata Computing

Excellent diversification

The 3 months correlation between National and Zapata is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Zapata Computing Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zapata Computing Holdings 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 Zapata Computing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zapata Computing Holdings has no effect on the direction of National Beverage i.e., National Beverage and Zapata Computing go up and down completely randomly.

Pair Corralation between National Beverage and Zapata Computing

Given the investment horizon of 90 days National Beverage is expected to generate 2493.54 times less return on investment than Zapata Computing. But when comparing it to its historical volatility, National Beverage Corp is 67.78 times less risky than Zapata Computing. It trades about 0.0 of its potential returns per unit of risk. Zapata Computing Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3.47  in Zapata Computing Holdings on September 19, 2024 and sell it today you would lose (2.91) from holding Zapata Computing Holdings or give up 83.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	49.21%
Values	Daily Returns

National Beverage Corp  vs.  Zapata Computing Holdings

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 current stock price disturbance, may contribute to short-term losses for the investors.

Zapata Computing Holdings

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Zapata Computing Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Zapata Computing showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Zapata Computing

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

The idea behind National Beverage Corp and Zapata Computing Holdings 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.