Correlation Between National Beverage and Analog Devices
Can any of the company-specific risk be diversified away by investing in both National Beverage and Analog Devices 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 Analog Devices 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 Analog Devices, you can compare the effects of market volatilities on National Beverage and Analog Devices 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 Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Analog Devices.
Diversification Opportunities for National Beverage and Analog Devices
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between National and Analog is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of National Beverage i.e., National Beverage and Analog Devices go up and down completely randomly.
Pair Corralation between National Beverage and Analog Devices
Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Analog Devices. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.16 times less risky than Analog Devices. The stock trades about -0.08 of its potential returns per unit of risk. The Analog Devices is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 19,101 in Analog Devices on February 22, 2024 and sell it today you would earn a total of 2,563 from holding Analog Devices or generate 13.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
National Beverage Corp vs. Analog Devices
Performance |
Timeline |
National Beverage Corp |
Analog Devices |
National Beverage and Analog Devices Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with National Beverage and Analog Devices
The main advantage of trading using opposite National Beverage and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' 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 |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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