Correlation Between National Beverage and Highway Holdings
Can any of the company-specific risk be diversified away by investing in both National Beverage and Highway Holdings 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 Highway Holdings 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 Highway Holdings Limited, you can compare the effects of market volatilities on National Beverage and Highway Holdings 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 Highway Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Highway Holdings.
Diversification Opportunities for National Beverage and Highway Holdings
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Highway is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings 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 Highway Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway Holdings has no effect on the direction of National Beverage i.e., National Beverage and Highway Holdings go up and down completely randomly.
Pair Corralation between National Beverage and Highway Holdings
Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Highway Holdings. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.26 times less risky than Highway Holdings. The stock trades about -0.17 of its potential returns per unit of risk. The Highway Holdings Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 207.00 in Highway Holdings Limited on February 3, 2024 and sell it today you would lose (2.00) from holding Highway Holdings Limited or give up 0.97% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
National Beverage Corp vs. Highway Holdings Limited
Performance |
Timeline |
National Beverage Corp |
Highway Holdings |
National Beverage and Highway Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with National Beverage and Highway Holdings
The main advantage of trading using opposite National Beverage and Highway Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, Highway Holdings 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 Highway Holdings will offset losses from the drop in Highway Holdings' long position.National Beverage vs. Vita Coco | National Beverage vs. PepsiCo | National Beverage vs. The Coca Cola | 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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