Correlation Between BOSTON BEER and Seiko Epson
Can any of the company-specific risk be diversified away by investing in both BOSTON BEER and Seiko Epson 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 Seiko Epson 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 Seiko Epson, you can compare the effects of market volatilities on BOSTON BEER and Seiko Epson 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 Seiko Epson. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and Seiko Epson.
Diversification Opportunities for BOSTON BEER and Seiko Epson
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BOSTON and Seiko is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Seiko Epson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seiko Epson 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 Seiko Epson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seiko Epson has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and Seiko Epson go up and down completely randomly.
Pair Corralation between BOSTON BEER and Seiko Epson
Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the Seiko Epson. But the stock apears to be less risky and, when comparing its historical volatility, BOSTON BEER A is 1.87 times less risky than Seiko Epson. The stock trades about -0.24 of its potential returns per unit of risk. The Seiko Epson is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 1,630 in Seiko Epson on November 27, 2024 and sell it today you would lose (90.00) from holding Seiko Epson or give up 5.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BOSTON BEER A vs. Seiko Epson
Performance |
| Timeline |
| BOSTON BEER A |
| Seiko Epson |
BOSTON BEER and Seiko Epson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BOSTON BEER and Seiko Epson
The main advantage of trading using opposite BOSTON BEER and Seiko Epson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOSTON BEER position performs unexpectedly, Seiko Epson 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 Seiko Epson will offset losses from the drop in Seiko Epson's long position.| BOSTON BEER vs. PPHE HOTEL GROUP | BOSTON BEER vs. RYU Apparel | BOSTON BEER vs. Singapore Airlines Limited | BOSTON BEER vs. Air Lease |
| Seiko Epson vs. CARSALESCOM | Seiko Epson vs. ZhongAn Online P | Seiko Epson vs. Perdoceo Education | Seiko Epson vs. BOS BETTER ONLINE |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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