Correlation Between National Beverage and First Republic
Can any of the company-specific risk be diversified away by investing in both National Beverage and First Republic 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 First Republic 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 First Republic Bank, you can compare the effects of market volatilities on National Beverage and First Republic 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 First Republic. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and First Republic.
Diversification Opportunities for National Beverage and First Republic
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and First is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and First Republic Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Republic Bank 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 First Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Republic Bank has no effect on the direction of National Beverage i.e., National Beverage and First Republic go up and down completely randomly.
Pair Corralation between National Beverage and First Republic
Given the investment horizon of 90 days National Beverage is expected to generate 90.27 times less return on investment than First Republic. But when comparing it to its historical volatility, National Beverage Corp is 22.71 times less risky than First Republic. It trades about 0.03 of its potential returns per unit of risk. First Republic Bank is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.60 in First Republic Bank on September 2, 2024 and sell it today you would lose (0.58) from holding First Republic Bank or give up 96.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 7.53% |
| Values | Daily Returns |
National Beverage Corp vs. First Republic Bank
Performance |
| Timeline |
| National Beverage Corp |
| First Republic Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
National Beverage and First Republic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and First Republic
The main advantage of trading using opposite National Beverage and First Republic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, First Republic 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 First Republic will offset losses from the drop in First Republic's long position.The idea behind National Beverage Corp and First Republic Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| First Republic vs. Emerson Electric | First Republic vs. Postal Realty Trust | First Republic vs. Eastern Co | First Republic vs. Cementos Pacasmayo SAA |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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