Correlation Between National Beverage and Cummins
Can any of the company-specific risk be diversified away by investing in both National Beverage and Cummins 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 Cummins 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 Cummins, you can compare the effects of market volatilities on National Beverage and Cummins 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 Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Cummins.
Diversification Opportunities for National Beverage and Cummins
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between National and Cummins is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins 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 Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of National Beverage i.e., National Beverage and Cummins go up and down completely randomly.
Pair Corralation between National Beverage and Cummins
Assuming the 90 days horizon National Beverage Corp is expected to under-perform the Cummins. In addition to that, National Beverage is 1.48 times more volatile than Cummins. It trades about -0.07 of its total potential returns per unit of risk. Cummins is currently generating about 0.25 per unit of volatility. If you would invest 33,411 in Cummins on September 13, 2024 and sell it today you would earn a total of 2,399 from holding Cummins or generate 7.18% 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. Cummins
Performance |
| Timeline |
| National Beverage Corp |
| Cummins |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Strong
National Beverage and Cummins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and Cummins
The main advantage of trading using opposite National Beverage and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.| National Beverage vs. Superior Plus Corp | National Beverage vs. SIVERS SEMICONDUCTORS AB | National Beverage vs. NorAm Drilling AS | National Beverage vs. Norsk Hydro ASA |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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