Correlation Between Rave Restaurant and National Beverage
Can any of the company-specific risk be diversified away by investing in both Rave Restaurant 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 Rave Restaurant and National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rave Restaurant Group and National Beverage Corp, you can compare the effects of market volatilities on Rave Restaurant 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 Rave Restaurant with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rave Restaurant and National Beverage.
Diversification Opportunities for Rave Restaurant and National Beverage
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rave and National is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Rave Restaurant 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 Rave Restaurant 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 Rave Restaurant 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 Rave Restaurant i.e., Rave Restaurant and National Beverage go up and down completely randomly.
Pair Corralation between Rave Restaurant and National Beverage
Given the investment horizon of 90 days Rave Restaurant is expected to generate 2.93 times less return on investment than National Beverage. In addition to that, Rave Restaurant is 2.3 times more volatile than National Beverage Corp. It trades about 0.02 of its total potential returns per unit of risk. National Beverage Corp is currently generating about 0.14 per unit of volatility. If you would invest 4,770 in National Beverage Corp on September 3, 2024 and sell it today you would earn a total of 169.00 from holding National Beverage Corp or generate 3.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rave Restaurant Group vs. National Beverage Corp
Performance |
| Timeline |
| Rave Restaurant Group |
| National Beverage Corp |
Rave Restaurant and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rave Restaurant and National Beverage
The main advantage of trading using opposite Rave Restaurant and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rave Restaurant 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.| Rave Restaurant vs. Ark Restaurants Corp | Rave Restaurant vs. One Group Hospitality | Rave Restaurant vs. Flanigans Enterprises | Rave Restaurant vs. Noble Romans |
| National Beverage vs. Celsius Holdings | National Beverage vs. Monster Beverage Corp | National Beverage vs. Coca Cola Femsa SAB | National Beverage vs. Keurig Dr Pepper |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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