Correlation Between National Beverage and DFS Furniture

Can any of the company-specific risk be diversified away by investing in both National Beverage and DFS Furniture 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 DFS Furniture 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 DFS Furniture PLC, you can compare the effects of market volatilities on National Beverage and DFS Furniture 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 DFS Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and DFS Furniture.

Diversification Opportunities for National Beverage and DFS Furniture

0.55

Correlation Coefficient

National Beverage  DFS Furniture

Very weak diversification

The 3 months correlation between National and DFS is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and DFS Furniture PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DFS Furniture PLC 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 DFS Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DFS Furniture PLC has no effect on the direction of National Beverage i.e., National Beverage and DFS Furniture go up and down completely randomly.

Pair Corralation between National Beverage and DFS Furniture

Assuming the 90 days trading horizon National Beverage is expected to generate 4.97 times less return on investment than DFS Furniture. But when comparing it to its historical volatility, National Beverage Corp is 1.02 times less risky than DFS Furniture. It trades about 0.05 of its potential returns per unit of risk. DFS Furniture PLC is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  13,150  in DFS Furniture PLC on April 23, 2025 and sell it today you would earn a total of  4,350  from holding DFS Furniture PLC or generate 33.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

National Beverage Corp  vs.  DFS Furniture PLC

National Beverage Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, National Beverage is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

DFS Furniture PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, DFS Furniture exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and DFS Furniture

The main advantage of trading using opposite National Beverage and DFS Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, DFS Furniture 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 DFS Furniture will offset losses from the drop in DFS Furniture's long position.

The idea behind National Beverage Corp and DFS Furniture PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.