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

0.09

Correlation Coefficient

National Beverage  Analog Devices

Significant diversification

The 3 months correlation between National and Analog is 0.09. 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 is expected to generate 1.73 times less return on investment than Analog Devices. But when comparing it to its historical volatility, National Beverage Corp is 2.42 times less risky than Analog Devices. It trades about 0.22 of its potential returns per unit of risk. Analog Devices is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  21,662  in Analog Devices on March 21, 2024 and sell it today you would earn a total of  1,876  from holding Analog Devices or generate 8.66% return on investment over 90 days.

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

National Beverage Corp  vs.  Analog Devices

National Beverage Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 3 (%) 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.

Analog Devices

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, Analog Devices demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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.

The idea behind National Beverage Corp and Analog Devices 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.