Correlation Between BOSTON BEER and PARKEN Sport
Can any of the company-specific risk be diversified away by investing in both BOSTON BEER and PARKEN Sport 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 PARKEN Sport 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 PARKEN Sport Entertainment, you can compare the effects of market volatilities on BOSTON BEER and PARKEN Sport 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 PARKEN Sport. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and PARKEN Sport.
Diversification Opportunities for BOSTON BEER and PARKEN Sport
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BOSTON and PARKEN is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and PARKEN Sport Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PARKEN Sport Enterta 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 PARKEN Sport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PARKEN Sport Enterta has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and PARKEN Sport go up and down completely randomly.
Pair Corralation between BOSTON BEER and PARKEN Sport
Assuming the 90 days trading horizon BOSTON BEER A is expected to generate 1.12 times more return on investment than PARKEN Sport. However, BOSTON BEER is 1.12 times more volatile than PARKEN Sport Entertainment. It trades about 0.23 of its potential returns per unit of risk. PARKEN Sport Entertainment is currently generating about -0.02 per unit of risk. If you would invest 26,740 in BOSTON BEER A on September 3, 2024 and sell it today you would earn a total of 2,240 from holding BOSTON BEER A or generate 8.38% 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. PARKEN Sport Entertainment
Performance |
| Timeline |
| BOSTON BEER A |
| PARKEN Sport Enterta |
BOSTON BEER and PARKEN Sport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BOSTON BEER and PARKEN Sport
The main advantage of trading using opposite BOSTON BEER and PARKEN Sport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOSTON BEER position performs unexpectedly, PARKEN Sport 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 PARKEN Sport will offset losses from the drop in PARKEN Sport'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 |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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