Correlation Between National Beverage and Park Electrochemical
Can any of the company-specific risk be diversified away by investing in both National Beverage and Park Electrochemical 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 Park Electrochemical 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 Park Electrochemical, you can compare the effects of market volatilities on National Beverage and Park Electrochemical 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 Park Electrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Park Electrochemical.
Diversification Opportunities for National Beverage and Park Electrochemical
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Park is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical 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 Park Electrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Electrochemical has no effect on the direction of National Beverage i.e., National Beverage and Park Electrochemical go up and down completely randomly.
Pair Corralation between National Beverage and Park Electrochemical
Given the investment horizon of 90 days National Beverage is expected to generate 3.79 times less return on investment than Park Electrochemical. But when comparing it to its historical volatility, National Beverage Corp is 1.3 times less risky than Park Electrochemical. It trades about 0.05 of its potential returns per unit of risk. Park Electrochemical is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,336 in Park Electrochemical on September 13, 2024 and sell it today you would earn a total of 169.00 from holding Park Electrochemical or generate 12.65% 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. Park Electrochemical
Performance |
| Timeline |
| National Beverage Corp |
| Park Electrochemical |
National Beverage and Park Electrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and Park Electrochemical
The main advantage of trading using opposite National Beverage and Park Electrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, Park Electrochemical 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 Park Electrochemical will offset losses from the drop in Park Electrochemical's long position.| National Beverage vs. Coca Cola Femsa SAB | National Beverage vs. Keurig Dr Pepper | National Beverage vs. Embotelladora Andina SA | National Beverage vs. Coca Cola European Partners |
| Park Electrochemical vs. Novocure | Park Electrochemical vs. HubSpot | Park Electrochemical vs. DigitalOcean Holdings | Park Electrochemical vs. Appian Corp |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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