Correlation Between BOSTON BEER and Insteel Industries
Can any of the company-specific risk be diversified away by investing in both BOSTON BEER and Insteel Industries 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 Insteel Industries 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 Insteel Industries, you can compare the effects of market volatilities on BOSTON BEER and Insteel Industries 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 Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and Insteel Industries.
Diversification Opportunities for BOSTON BEER and Insteel Industries
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BOSTON and Insteel is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries 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 Insteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insteel Industries has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and Insteel Industries go up and down completely randomly.
Pair Corralation between BOSTON BEER and Insteel Industries
Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the Insteel Industries. But the stock apears to be less risky and, when comparing its historical volatility, BOSTON BEER A is 1.09 times less risky than Insteel Industries. The stock trades about -0.03 of its potential returns per unit of risk. The Insteel Industries is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,826 in Insteel Industries on September 26, 2024 and sell it today you would lose (146.00) from holding Insteel Industries or give up 5.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BOSTON BEER A vs. Insteel Industries
Performance |
| Timeline |
| BOSTON BEER A |
| Insteel Industries |
BOSTON BEER and Insteel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BOSTON BEER and Insteel Industries
The main advantage of trading using opposite BOSTON BEER and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOSTON BEER position performs unexpectedly, Insteel Industries 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 Insteel Industries will offset losses from the drop in Insteel Industries' long position.| BOSTON BEER vs. Apple Inc | BOSTON BEER vs. Apple Inc | BOSTON BEER vs. Microsoft | BOSTON BEER vs. Microsoft |
| Insteel Industries vs. MACOM Technology Solutions | Insteel Industries vs. SCOTT TECHNOLOGY | Insteel Industries vs. ScanSource | Insteel Industries vs. BOSTON BEER A |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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