Correlation Between BOSTON BEER and THRACE PLASTICS
Can any of the company-specific risk be diversified away by investing in both BOSTON BEER and THRACE PLASTICS 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 THRACE PLASTICS 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 THRACE PLASTICS, you can compare the effects of market volatilities on BOSTON BEER and THRACE PLASTICS 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 THRACE PLASTICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and THRACE PLASTICS.
Diversification Opportunities for BOSTON BEER and THRACE PLASTICS
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BOSTON and THRACE is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and THRACE PLASTICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THRACE PLASTICS 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 THRACE PLASTICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THRACE PLASTICS has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and THRACE PLASTICS go up and down completely randomly.
Pair Corralation between BOSTON BEER and THRACE PLASTICS
Assuming the 90 days trading horizon BOSTON BEER A is expected to generate 0.99 times more return on investment than THRACE PLASTICS. However, BOSTON BEER A is 1.01 times less risky than THRACE PLASTICS. It trades about 0.19 of its potential returns per unit of risk. THRACE PLASTICS 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 1,700 from holding BOSTON BEER A or generate 5.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BOSTON BEER A vs. THRACE PLASTICS
Performance |
| Timeline |
| BOSTON BEER A |
| THRACE PLASTICS |
BOSTON BEER and THRACE PLASTICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BOSTON BEER and THRACE PLASTICS
The main advantage of trading using opposite BOSTON BEER and THRACE PLASTICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOSTON BEER position performs unexpectedly, THRACE PLASTICS 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 THRACE PLASTICS will offset losses from the drop in THRACE PLASTICS's long position.| BOSTON BEER vs. Apple Inc | BOSTON BEER vs. Apple Inc | BOSTON BEER vs. Apple Inc | BOSTON BEER vs. Apple Inc |
| THRACE PLASTICS vs. Apple Inc | THRACE PLASTICS vs. Apple Inc | THRACE PLASTICS vs. Apple Inc | THRACE PLASTICS vs. Apple Inc |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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