Correlation Between National Beverage and Chongqing Machinery
Can any of the company-specific risk be diversified away by investing in both National Beverage and Chongqing Machinery 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 Chongqing Machinery 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 Chongqing Machinery Electric, you can compare the effects of market volatilities on National Beverage and Chongqing Machinery 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 Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Chongqing Machinery.
Diversification Opportunities for National Beverage and Chongqing Machinery
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Chongqing is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery 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 Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of National Beverage i.e., National Beverage and Chongqing Machinery go up and down completely randomly.
Pair Corralation between National Beverage and Chongqing Machinery
Assuming the 90 days horizon National Beverage Corp is expected to generate 0.77 times more return on investment than Chongqing Machinery. However, National Beverage Corp is 1.3 times less risky than Chongqing Machinery. It trades about 0.18 of its potential returns per unit of risk. Chongqing Machinery Electric is currently generating about 0.04 per unit of risk. If you would invest 4,180 in National Beverage Corp on August 25, 2024 and sell it today you would earn a total of 280.00 from holding National Beverage Corp or generate 6.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Beverage Corp vs. Chongqing Machinery Electric
Performance |
| Timeline |
| National Beverage Corp |
| Chongqing Machinery |
National Beverage and Chongqing Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and Chongqing Machinery
The main advantage of trading using opposite National Beverage and Chongqing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, Chongqing Machinery 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 Chongqing Machinery will offset losses from the drop in Chongqing Machinery's long position.| National Beverage vs. Coca Cola FEMSA SAB | National Beverage vs. COCA A HBC | National Beverage vs. Superior Plus Corp | National Beverage vs. NMI Holdings |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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