Correlation Between BOSTON BEER and NISSAN CHEMICAL
Can any of the company-specific risk be diversified away by investing in both BOSTON BEER and NISSAN CHEMICAL 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 NISSAN CHEMICAL 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 NISSAN CHEMICAL IND, you can compare the effects of market volatilities on BOSTON BEER and NISSAN CHEMICAL 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 NISSAN CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and NISSAN CHEMICAL.
Diversification Opportunities for BOSTON BEER and NISSAN CHEMICAL
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BOSTON and NISSAN is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and NISSAN CHEMICAL IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISSAN CHEMICAL IND 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 NISSAN CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISSAN CHEMICAL IND has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and NISSAN CHEMICAL go up and down completely randomly.
Pair Corralation between BOSTON BEER and NISSAN CHEMICAL
Assuming the 90 days trading horizon BOSTON BEER A is expected to generate 1.2 times more return on investment than NISSAN CHEMICAL. However, BOSTON BEER is 1.2 times more volatile than NISSAN CHEMICAL IND. It trades about -0.01 of its potential returns per unit of risk. NISSAN CHEMICAL IND is currently generating about -0.03 per unit of risk. If you would invest 33,985 in BOSTON BEER A on September 3, 2024 and sell it today you would lose (5,005) from holding BOSTON BEER A or give up 14.73% 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. NISSAN CHEMICAL IND
Performance |
| Timeline |
| BOSTON BEER A |
| NISSAN CHEMICAL IND |
BOSTON BEER and NISSAN CHEMICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BOSTON BEER and NISSAN CHEMICAL
The main advantage of trading using opposite BOSTON BEER and NISSAN CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOSTON BEER position performs unexpectedly, NISSAN CHEMICAL 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 NISSAN CHEMICAL will offset losses from the drop in NISSAN CHEMICAL'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 |
| NISSAN CHEMICAL vs. TOTAL GABON | NISSAN CHEMICAL vs. Walgreens Boots Alliance | NISSAN CHEMICAL vs. Peak Resources Limited |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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