Correlation Between National Beverage and Coca Cola
Can any of the company-specific risk be diversified away by investing in both National Beverage and Coca Cola 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 Coca Cola 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 The Coca Cola, you can compare the effects of market volatilities on National Beverage and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Coca Cola.
Diversification Opportunities for National Beverage and Coca Cola
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between National and Coca is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of National Beverage i.e., National Beverage and Coca Cola go up and down completely randomly.
Pair Corralation between National Beverage and Coca Cola
Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Coca Cola. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.04 times less risky than Coca Cola. The stock trades about -0.01 of its potential returns per unit of risk. The The Coca Cola is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 6,184 in The Coca Cola on November 2, 2024 and sell it today you would earn a total of 221.00 from holding The Coca Cola or generate 3.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Beverage Corp vs. The Coca Cola
Performance |
| Timeline |
| National Beverage Corp |
| Coca Cola |
National Beverage and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and Coca Cola
The main advantage of trading using opposite National Beverage and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.| National Beverage vs. PepsiCo | National Beverage vs. Vita Coco | National Beverage vs. Aquagold International | National Beverage vs. Thrivent High Yield |
| Coca Cola vs. PepsiCo | Coca Cola vs. Vita Coco | Coca Cola vs. Aquagold International | Coca Cola vs. Thrivent High Yield |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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