Correlation Between BOSTON BEER and Titan Machinery
Can any of the company-specific risk be diversified away by investing in both BOSTON BEER and Titan Machinery 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 BOSTON BEER and Titan Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BOSTON BEER A and Titan Machinery, you can compare the effects of market volatilities on BOSTON BEER and Titan Machinery 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 BOSTON BEER with a short position of Titan Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and Titan Machinery.
Diversification Opportunities for BOSTON BEER and Titan Machinery
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BOSTON and Titan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and BOSTON BEER 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 BOSTON BEER A are associated (or correlated) with Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and Titan Machinery go up and down completely randomly.
Pair Corralation between BOSTON BEER and Titan Machinery
Assuming the 90 days trading horizon BOSTON BEER A is expected to generate 0.43 times more return on investment than Titan Machinery. However, BOSTON BEER A is 2.31 times less risky than Titan Machinery. It trades about 0.04 of its potential returns per unit of risk. Titan Machinery is currently generating about 0.01 per unit of risk. If you would invest 27,400 in BOSTON BEER A on September 3, 2024 and sell it today you would earn a total of 2,420 from holding BOSTON BEER A or generate 8.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BOSTON BEER A vs. Titan Machinery
Performance |
| Timeline |
| BOSTON BEER A |
| Titan Machinery |
BOSTON BEER and Titan Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BOSTON BEER and Titan Machinery
The main advantage of trading using opposite BOSTON BEER and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOSTON BEER position performs unexpectedly, Titan Machinery 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 Titan Machinery will offset losses from the drop in Titan Machinery's long position.| BOSTON BEER vs. China Resources Beer | BOSTON BEER vs. Tsingtao Brewery | BOSTON BEER vs. Molson Coors Beverage | BOSTON BEER vs. United Breweries Co |
| Titan Machinery vs. WATSCO INC B | Titan Machinery vs. Indutrade AB | Titan Machinery vs. Superior Plus Corp | Titan Machinery vs. NMI Holdings |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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