Correlation Between BOSTON BEER and Flight Centre
Can any of the company-specific risk be diversified away by investing in both BOSTON BEER and Flight Centre 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 Flight Centre 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 Flight Centre Travel, you can compare the effects of market volatilities on BOSTON BEER and Flight Centre 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 Flight Centre. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and Flight Centre.
Diversification Opportunities for BOSTON BEER and Flight Centre
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BOSTON and Flight is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Flight Centre Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flight Centre Travel 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 Flight Centre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flight Centre Travel has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and Flight Centre go up and down completely randomly.
Pair Corralation between BOSTON BEER and Flight Centre
Assuming the 90 days trading horizon BOSTON BEER A is expected to generate 0.89 times more return on investment than Flight Centre. However, BOSTON BEER A is 1.13 times less risky than Flight Centre. It trades about 0.13 of its potential returns per unit of risk. Flight Centre Travel is currently generating about 0.03 per unit of risk. If you would invest 28,460 in BOSTON BEER A on September 12, 2024 and sell it today you would earn a total of 1,240 from holding BOSTON BEER A or generate 4.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BOSTON BEER A vs. Flight Centre Travel
Performance |
| Timeline |
| BOSTON BEER A |
| Flight Centre Travel |
BOSTON BEER and Flight Centre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BOSTON BEER and Flight Centre
The main advantage of trading using opposite BOSTON BEER and Flight Centre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOSTON BEER position performs unexpectedly, Flight Centre 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 Flight Centre will offset losses from the drop in Flight Centre's long position.| BOSTON BEER vs. Apple Inc | BOSTON BEER vs. Apple Inc | BOSTON BEER vs. Apple Inc | BOSTON BEER vs. Apple Inc |
| Flight Centre vs. KENEDIX OFFICE INV | Flight Centre vs. British American Tobacco | Flight Centre vs. CITY OFFICE REIT | Flight Centre vs. MTI WIRELESS EDGE |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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