Correlation Between China BlueChemical and National Beverage

Can any of the company-specific risk be diversified away by investing in both China BlueChemical and National Beverage 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 China BlueChemical and National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China BlueChemical and National Beverage Corp, you can compare the effects of market volatilities on China BlueChemical and National Beverage 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 China BlueChemical with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of China BlueChemical and National Beverage.

Diversification Opportunities for China BlueChemical and National Beverage

0.11

Correlation Coefficient

China BlueChemical  National Beverage

Average diversification

The 3 months correlation between China and National is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp and China BlueChemical 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 China BlueChemical are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of China BlueChemical i.e., China BlueChemical and National Beverage go up and down completely randomly.

Pair Corralation between China BlueChemical and National Beverage

Assuming the 90 days horizon China BlueChemical is expected to generate 2.31 times more return on investment than National Beverage. However, China BlueChemical is 2.31 times more volatile than National Beverage Corp. It trades about 0.09 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.06 per unit of risk. If you would invest  21.00  in China BlueChemical on September 23, 2024 and sell it today you would earn a total of  4.00  from holding China BlueChemical or generate 19.05% return on investment over 90 days.

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

China BlueChemical  vs.  National Beverage Corp

China BlueChemical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China BlueChemical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China BlueChemical reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly stable basic indicators, National Beverage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China BlueChemical and National Beverage

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

The idea behind China BlueChemical and National Beverage Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.