Correlation Between National Beverage and Summit Materials

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

Diversification Opportunities for National Beverage and Summit Materials

0.51

Correlation Coefficient

National Beverage  Summit Materials

Very weak diversification

The 3 months correlation between National and Summit is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of National Beverage i.e., National Beverage and Summit Materials go up and down completely randomly.

Pair Corralation between National Beverage and Summit Materials

Given the investment horizon of 90 days National Beverage Corp is expected to generate 1.17 times more return on investment than Summit Materials. However, National Beverage is 1.17 times more volatile than Summit Materials. It trades about -0.15 of its potential returns per unit of risk. Summit Materials is currently generating about -0.28 per unit of risk. If you would invest  4,956  in National Beverage Corp on February 3, 2024 and sell it today you would lose (266.00) from holding National Beverage Corp or give up 5.37% of portfolio value over 90 days.

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

National Beverage Corp  vs.  Summit Materials

National Beverage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, National Beverage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Summit Materials

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Summit Materials may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with National Beverage and Summit Materials

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

The idea behind National Beverage Corp and Summit Materials 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.