Correlation Between Boston Beer and Boise Cascade
Can any of the company-specific risk be diversified away by investing in both Boston Beer and Boise Cascade 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 Boise Cascade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Boston Beer and Boise Cascade, you can compare the effects of market volatilities on Boston Beer and Boise Cascade 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 Boise Cascade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Boise Cascade.
Diversification Opportunities for Boston Beer and Boise Cascade
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Boston and Boise is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and Boise Cascade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boise Cascade 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 The Boston Beer are associated (or correlated) with Boise Cascade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boise Cascade has no effect on the direction of Boston Beer i.e., Boston Beer and Boise Cascade go up and down completely randomly.
Pair Corralation between Boston Beer and Boise Cascade
Assuming the 90 days trading horizon Boston Beer is expected to generate 10.79 times less return on investment than Boise Cascade. But when comparing it to its historical volatility, The Boston Beer is 1.1 times less risky than Boise Cascade. It trades about 0.01 of its potential returns per unit of risk. Boise Cascade is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,246 in Boise Cascade on September 14, 2024 and sell it today you would earn a total of 7,199 from holding Boise Cascade or generate 115.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Boston Beer vs. Boise Cascade
Performance |
| Timeline |
| Boston Beer |
| Boise Cascade |
Boston Beer and Boise Cascade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Boise Cascade
The main advantage of trading using opposite Boston Beer and Boise Cascade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Boise Cascade 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 Boise Cascade will offset losses from the drop in Boise Cascade's long position.| Boston Beer vs. Tyson Foods | Boston Beer vs. QUEEN S ROAD | Boston Beer vs. Liberty Broadband | Boston Beer vs. Collins Foods Limited |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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