Correlation Between National Beverage and Salesforce

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

Diversification Opportunities for National Beverage and Salesforce

Very good diversification

The 3 months correlation between National and Salesforce is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce 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 Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of National Beverage i.e., National Beverage and Salesforce go up and down completely randomly.

Pair Corralation between National Beverage and Salesforce

Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Salesforce. In addition to that, National Beverage is 1.66 times more volatile than Salesforce. It trades about -0.25 of its total potential returns per unit of risk. Salesforce is currently generating about 0.12 per unit of volatility. If you would invest  20,676  in Salesforce on June 23, 2023 and sell it today you would earn a total of  627.00  from holding Salesforce or generate 3.03% return on investment over 90 days.

National Beverage Corp  vs.  Salesforce

National Beverage Corp

National Performance

0 of 100

Over the last 90 days National Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, National Beverage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Salesforce

Salesforce Performance

1 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Salesforce is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the insiders.

Pair Trading with National Beverage and Salesforce

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

The idea behind National Beverage Corp and Salesforce 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.