Correlation Between National Beverage and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both National Beverage and Electronic Arts 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 Electronic Arts 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 Electronic Arts, you can compare the effects of market volatilities on National Beverage and Electronic Arts 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 Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Electronic Arts.
Diversification Opportunities for National Beverage and Electronic Arts
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between National and Electronic is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of National Beverage i.e., National Beverage and Electronic Arts go up and down completely randomly.
Pair Corralation between National Beverage and Electronic Arts
Assuming the 90 days horizon National Beverage Corp is expected to generate 1.63 times more return on investment than Electronic Arts. However, National Beverage is 1.63 times more volatile than Electronic Arts. It trades about 0.33 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.44 per unit of risk. If you would invest 4,100 in National Beverage Corp on September 1, 2024 and sell it today you would earn a total of 580.00 from holding National Beverage Corp or generate 14.15% 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. Electronic Arts
Performance |
| Timeline |
| National Beverage Corp |
| Electronic Arts |
National Beverage and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and Electronic Arts
The main advantage of trading using opposite National Beverage and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, Electronic Arts 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 Electronic Arts will offset losses from the drop in Electronic Arts' long position.| National Beverage vs. PepsiCo | National Beverage vs. Embotelladora Andina SA | National Beverage vs. Superior Plus Corp | National Beverage vs. NMI Holdings |
| Electronic Arts vs. PREMIER FOODS | Electronic Arts vs. MOLSON RS BEVERAGE | Electronic Arts vs. TYSON FOODS A | Electronic Arts vs. JJ SNACK FOODS |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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