Correlation Between BOSTON BEER and BLUESCOPE STEEL
Can any of the company-specific risk be diversified away by investing in both BOSTON BEER and BLUESCOPE STEEL 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 BLUESCOPE STEEL 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 BLUESCOPE STEEL, you can compare the effects of market volatilities on BOSTON BEER and BLUESCOPE STEEL 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 BLUESCOPE STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and BLUESCOPE STEEL.
Diversification Opportunities for BOSTON BEER and BLUESCOPE STEEL
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BOSTON and BLUESCOPE is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and BLUESCOPE STEEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLUESCOPE STEEL 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 BLUESCOPE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLUESCOPE STEEL has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and BLUESCOPE STEEL go up and down completely randomly.
Pair Corralation between BOSTON BEER and BLUESCOPE STEEL
Assuming the 90 days trading horizon BOSTON BEER A is expected to generate 0.67 times more return on investment than BLUESCOPE STEEL. However, BOSTON BEER A is 1.48 times less risky than BLUESCOPE STEEL. It trades about 0.23 of its potential returns per unit of risk. BLUESCOPE STEEL is currently generating about 0.04 per unit of risk. If you would invest 27,200 in BOSTON BEER A on August 28, 2024 and sell it today you would earn a total of 2,480 from holding BOSTON BEER A or generate 9.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BOSTON BEER A vs. BLUESCOPE STEEL
Performance |
| Timeline |
| BOSTON BEER A |
| BLUESCOPE STEEL |
BOSTON BEER and BLUESCOPE STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BOSTON BEER and BLUESCOPE STEEL
The main advantage of trading using opposite BOSTON BEER and BLUESCOPE STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOSTON BEER position performs unexpectedly, BLUESCOPE STEEL 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 BLUESCOPE STEEL will offset losses from the drop in BLUESCOPE STEEL's long position.| BOSTON BEER vs. Apple Inc | BOSTON BEER vs. Apple Inc | BOSTON BEER vs. Apple Inc | BOSTON BEER vs. Microsoft |
| BLUESCOPE STEEL vs. Spirent Communications plc | BLUESCOPE STEEL vs. Verizon Communications | BLUESCOPE STEEL vs. Charter Communications | BLUESCOPE STEEL vs. Entravision Communications |
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.
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