Correlation Between Summit Materials and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Boston Beer 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 Summit Materials and Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and The Boston Beer, you can compare the effects of market volatilities on Summit Materials and Boston Beer 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 Summit Materials with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Boston Beer.
Diversification Opportunities for Summit Materials and Boston Beer
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Summit and Boston is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and The Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Summit Materials 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 Summit Materials are associated (or correlated) with Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Summit Materials i.e., Summit Materials and Boston Beer go up and down completely randomly.
Pair Corralation between Summit Materials and Boston Beer
Assuming the 90 days trading horizon Summit Materials is expected to generate 1.48 times more return on investment than Boston Beer. However, Summit Materials is 1.48 times more volatile than The Boston Beer. It trades about 0.12 of its potential returns per unit of risk. The Boston Beer is currently generating about 0.04 per unit of risk. If you would invest 3,460 in Summit Materials on September 3, 2024 and sell it today you would earn a total of 1,380 from holding Summit Materials or generate 39.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. The Boston Beer
Performance |
| Timeline |
| Summit Materials |
| Boston Beer |
Summit Materials and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Boston Beer
The main advantage of trading using opposite Summit Materials and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Boston Beer 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 Boston Beer will offset losses from the drop in Boston Beer's long position.| Summit Materials vs. KIMBALL ELECTRONICS | Summit Materials vs. AOI Electronics Co | Summit Materials vs. LION ONE METALS | Summit Materials vs. Perseus Mining Limited |
| Boston Beer vs. Globe Trade Centre | Boston Beer vs. RETAIL FOOD GROUP | Boston Beer vs. SIDETRADE EO 1 | Boston Beer vs. The Trade Desk |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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