Correlation Between National Beverage and United States

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

Diversification Opportunities for National Beverage and United States

0.43

Correlation Coefficient

National Beverage  United States

Very weak diversification

The 3 months correlation between National and United is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of National Beverage i.e., National Beverage and United States go up and down completely randomly.

Pair Corralation between National Beverage and United States

Given the investment horizon of 90 days National Beverage is expected to generate 5.44 times less return on investment than United States. But when comparing it to its historical volatility, National Beverage Corp is 1.73 times less risky than United States. It trades about 0.01 of its potential returns per unit of risk. United States Steel is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,543  in United States Steel on August 20, 2024 and sell it today you would earn a total of  1,040  from holding United States Steel or generate 40.9% return on investment over 90 days.

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

National Beverage Corp  vs.  United States Steel

National Beverage Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 5 (%) 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 newest stock price disturbance, may contribute to short-term losses for the investors.

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with National Beverage and United States

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

The idea behind National Beverage Corp and United States Steel 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.