Correlation Between Performance Food and National Beverage
Can any of the company-specific risk be diversified away by investing in both Performance Food and National Beverage 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 Performance Food and National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Performance Food Group and National Beverage Corp, you can compare the effects of market volatilities on Performance Food and National Beverage 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 Performance Food with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and National Beverage.
Diversification Opportunities for Performance Food and National Beverage
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Performance and National is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp and Performance Food 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 Performance Food Group are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of Performance Food i.e., Performance Food and National Beverage go up and down completely randomly.
Pair Corralation between Performance Food and National Beverage
Assuming the 90 days trading horizon Performance Food Group is expected to generate 1.0 times more return on investment than National Beverage. However, Performance Food is 1.0 times more volatile than National Beverage Corp. It trades about 0.18 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.1 per unit of risk. If you would invest 6,700 in Performance Food Group on August 25, 2024 and sell it today you would earn a total of 1,200 from holding Performance Food Group or generate 17.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Performance Food Group vs. National Beverage Corp
Performance |
| Timeline |
| Performance Food |
| National Beverage Corp |
Performance Food and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Performance Food and National Beverage
The main advantage of trading using opposite Performance Food and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Performance Food position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| Performance Food vs. Apple Inc | Performance Food vs. Apple Inc | Performance Food vs. Apple Inc | Performance Food vs. Apple Inc |
| National Beverage vs. COCA A HBC | National Beverage vs. Superior Plus Corp | National Beverage vs. NMI Holdings | National Beverage vs. Origin Agritech |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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