Correlation Between National Beverage and BOSTON BEER
Can any of the company-specific risk be diversified away by investing in both National Beverage and BOSTON BEER 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 BOSTON BEER 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 BOSTON BEER A , you can compare the effects of market volatilities on National Beverage and BOSTON BEER 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 BOSTON BEER. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and BOSTON BEER.
Diversification Opportunities for National Beverage and BOSTON BEER
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between National and BOSTON is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and BOSTON BEER A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOSTON BEER A 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 BOSTON BEER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOSTON BEER A has no effect on the direction of National Beverage i.e., National Beverage and BOSTON BEER go up and down completely randomly.
Pair Corralation between National Beverage and BOSTON BEER
Assuming the 90 days horizon National Beverage is expected to generate 1.18 times less return on investment than BOSTON BEER. But when comparing it to its historical volatility, National Beverage Corp is 1.05 times less risky than BOSTON BEER. It trades about 0.2 of its potential returns per unit of risk. BOSTON BEER A is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 27,200 in BOSTON BEER A on August 27, 2024 and sell it today you would earn a total of 2,480 from holding BOSTON BEER A or generate 9.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Beverage Corp vs. BOSTON BEER A
Performance |
| Timeline |
| National Beverage Corp |
| BOSTON BEER A |
National Beverage and BOSTON BEER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and BOSTON BEER
The main advantage of trading using opposite National Beverage and BOSTON BEER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, BOSTON BEER 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 BOSTON BEER will offset losses from the drop in BOSTON BEER's long position.| National Beverage vs. FIREWEED METALS P | National Beverage vs. Kaiser Aluminum | National Beverage vs. PennyMac Mortgage Investment | National Beverage vs. Chuangs China Investments |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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