Correlation Between National Beverage and Flexible Solutions
Can any of the company-specific risk be diversified away by investing in both National Beverage and Flexible Solutions 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 Flexible Solutions 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 Flexible Solutions International, you can compare the effects of market volatilities on National Beverage and Flexible Solutions 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 Flexible Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Flexible Solutions.
Diversification Opportunities for National Beverage and Flexible Solutions
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Flexible is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of National Beverage i.e., National Beverage and Flexible Solutions go up and down completely randomly.
Pair Corralation between National Beverage and Flexible Solutions
Given the investment horizon of 90 days National Beverage is expected to generate 3.61 times less return on investment than Flexible Solutions. But when comparing it to its historical volatility, National Beverage Corp is 2.77 times less risky than Flexible Solutions. It trades about 0.09 of its potential returns per unit of risk. Flexible Solutions International is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 332.00 in Flexible Solutions International on September 3, 2024 and sell it today you would earn a total of 83.00 from holding Flexible Solutions International or generate 25.0% 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. Flexible Solutions Internation
Performance |
| Timeline |
| National Beverage Corp |
| Flexible Solutions |
National Beverage and Flexible Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and Flexible Solutions
The main advantage of trading using opposite National Beverage and Flexible Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, Flexible Solutions 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 Flexible Solutions will offset losses from the drop in Flexible Solutions' long position.| National Beverage vs. Celsius Holdings | National Beverage vs. Monster Beverage Corp | National Beverage vs. Coca Cola Femsa SAB | National Beverage vs. Keurig Dr Pepper |
| Flexible Solutions vs. SPACE | Flexible Solutions vs. Bayview Acquisition Corp | Flexible Solutions vs. T Rowe Price | Flexible Solutions vs. Ampleforth |
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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