Correlation Between National Beverage and PACCAR
Can any of the company-specific risk be diversified away by investing in both National Beverage and PACCAR 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 PACCAR 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 PACCAR Inc, you can compare the effects of market volatilities on National Beverage and PACCAR 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 PACCAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and PACCAR.
Diversification Opportunities for National Beverage and PACCAR
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between National and PACCAR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of National Beverage i.e., National Beverage and PACCAR go up and down completely randomly.
Pair Corralation between National Beverage and PACCAR
Given the investment horizon of 90 days National Beverage is expected to generate 3.22 times less return on investment than PACCAR. But when comparing it to its historical volatility, National Beverage Corp is 1.69 times less risky than PACCAR. It trades about 0.14 of its potential returns per unit of risk. PACCAR Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 10,455 in PACCAR Inc on September 3, 2024 and sell it today you would earn a total of 1,245 from holding PACCAR Inc or generate 11.91% 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. PACCAR Inc
Performance |
| Timeline |
| National Beverage Corp |
| PACCAR Inc |
National Beverage and PACCAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and PACCAR
The main advantage of trading using opposite National Beverage and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, PACCAR 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 PACCAR will offset losses from the drop in PACCAR'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 |
| PACCAR vs. Manitowoc | PACCAR vs. Alamo Group | PACCAR vs. AGCO Corporation | PACCAR vs. Hyster Yale Materials Handling |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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