Correlation Between National Beverage and United Utilities
Can any of the company-specific risk be diversified away by investing in both National Beverage and United Utilities 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 Utilities 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 Utilities Group, you can compare the effects of market volatilities on National Beverage and United Utilities 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 Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and United Utilities.
Diversification Opportunities for National Beverage and United Utilities
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and United is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of National Beverage i.e., National Beverage and United Utilities go up and down completely randomly.
Pair Corralation between National Beverage and United Utilities
Assuming the 90 days trading horizon National Beverage Corp is expected to under-perform the United Utilities. In addition to that, National Beverage is 1.08 times more volatile than United Utilities Group. It trades about -0.19 of its total potential returns per unit of risk. United Utilities Group is currently generating about -0.2 per unit of volatility. If you would invest 110,131 in United Utilities Group on October 30, 2024 and sell it today you would lose (12,611) from holding United Utilities Group or give up 11.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.5% |
| Values | Daily Returns |
National Beverage Corp vs. United Utilities Group
Performance |
| Timeline |
| National Beverage Corp |
| United Utilities |
National Beverage and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and United Utilities
The main advantage of trading using opposite National Beverage and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, United Utilities 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 Utilities will offset losses from the drop in United Utilities' long position.| National Beverage vs. Zoom Video Communications | National Beverage vs. DXC Technology Co | National Beverage vs. Sunny Optical Technology | National Beverage vs. Vitec Software Group |
| United Utilities vs. Catalyst Media Group | United Utilities vs. CATLIN GROUP | United Utilities vs. Tamburi Investment Partners | United Utilities vs. Magnora ASA |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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