Correlation Between National Beverage and Nongfu Spring
Can any of the company-specific risk be diversified away by investing in both National Beverage and Nongfu Spring 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 Nongfu Spring 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 Nongfu Spring Co, you can compare the effects of market volatilities on National Beverage and Nongfu Spring 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 Nongfu Spring. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Nongfu Spring.
Diversification Opportunities for National Beverage and Nongfu Spring
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between National and Nongfu is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Nongfu Spring Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nongfu Spring 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 Nongfu Spring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nongfu Spring has no effect on the direction of National Beverage i.e., National Beverage and Nongfu Spring go up and down completely randomly.
Pair Corralation between National Beverage and Nongfu Spring
Given the investment horizon of 90 days National Beverage Corp is expected to generate 0.67 times more return on investment than Nongfu Spring. However, National Beverage Corp is 1.5 times less risky than Nongfu Spring. It trades about 0.02 of its potential returns per unit of risk. Nongfu Spring Co is currently generating about 0.01 per unit of risk. If you would invest 4,461 in National Beverage Corp on September 5, 2024 and sell it today you would earn a total of 491.00 from holding National Beverage Corp or generate 11.01% 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. Nongfu Spring Co
Performance |
| Timeline |
| National Beverage Corp |
| Nongfu Spring |
National Beverage and Nongfu Spring Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and Nongfu Spring
The main advantage of trading using opposite National Beverage and Nongfu Spring positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, Nongfu Spring 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 Nongfu Spring will offset losses from the drop in Nongfu Spring's 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 |
| Nongfu Spring vs. The Coca Cola | Nongfu Spring vs. Monster Beverage Corp | Nongfu Spring vs. Celsius Holdings | Nongfu Spring vs. Coca Cola Consolidated |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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