Correlation Between BOSTON BEER and RETAIL FOOD
Can any of the company-specific risk be diversified away by investing in both BOSTON BEER and RETAIL FOOD 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 RETAIL FOOD 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 RETAIL FOOD GROUP, you can compare the effects of market volatilities on BOSTON BEER and RETAIL FOOD 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 RETAIL FOOD. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and RETAIL FOOD.
Diversification Opportunities for BOSTON BEER and RETAIL FOOD
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BOSTON and RETAIL is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and RETAIL FOOD GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RETAIL FOOD GROUP 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 RETAIL FOOD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RETAIL FOOD GROUP has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and RETAIL FOOD go up and down completely randomly.
Pair Corralation between BOSTON BEER and RETAIL FOOD
Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the RETAIL FOOD. But the stock apears to be less risky and, when comparing its historical volatility, BOSTON BEER A is 1.19 times less risky than RETAIL FOOD. The stock trades about -0.54 of its potential returns per unit of risk. The RETAIL FOOD GROUP is currently generating about -0.31 of returns per unit of risk over similar time horizon. If you would invest 137.00 in RETAIL FOOD GROUP on October 24, 2024 and sell it today you would lose (16.00) from holding RETAIL FOOD GROUP or give up 11.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BOSTON BEER A vs. RETAIL FOOD GROUP
Performance |
| Timeline |
| BOSTON BEER A |
| RETAIL FOOD GROUP |
BOSTON BEER and RETAIL FOOD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BOSTON BEER and RETAIL FOOD
The main advantage of trading using opposite BOSTON BEER and RETAIL FOOD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOSTON BEER position performs unexpectedly, RETAIL FOOD 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 RETAIL FOOD will offset losses from the drop in RETAIL FOOD's long position.| BOSTON BEER vs. Aegean Airlines SA | BOSTON BEER vs. SINGAPORE AIRLINES | BOSTON BEER vs. AEGEAN AIRLINES | BOSTON BEER vs. United Airlines Holdings |
| RETAIL FOOD vs. BJs Restaurants | RETAIL FOOD vs. Haverty Furniture Companies | RETAIL FOOD vs. Haier Smart Home | RETAIL FOOD vs. Urban Outfitters |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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