Correlation Between Boston Beer and POWER METALS
Can any of the company-specific risk be diversified away by investing in both Boston Beer and POWER METALS 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 POWER METALS 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 POWER METALS, you can compare the effects of market volatilities on Boston Beer and POWER METALS 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 POWER METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and POWER METALS.
Diversification Opportunities for Boston Beer and POWER METALS
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Boston and POWER is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and POWER METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POWER METALS 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 POWER METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POWER METALS has no effect on the direction of Boston Beer i.e., Boston Beer and POWER METALS go up and down completely randomly.
Pair Corralation between Boston Beer and POWER METALS
Assuming the 90 days trading horizon Boston Beer is expected to generate 11.17 times less return on investment than POWER METALS. But when comparing it to its historical volatility, The Boston Beer is 2.34 times less risky than POWER METALS. It trades about 0.01 of its potential returns per unit of risk. POWER METALS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 22.00 in POWER METALS on September 14, 2024 and sell it today you would earn a total of 7.00 from holding POWER METALS or generate 31.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Boston Beer vs. POWER METALS
Performance |
| Timeline |
| Boston Beer |
| POWER METALS |
Boston Beer and POWER METALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and POWER METALS
The main advantage of trading using opposite Boston Beer and POWER METALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, POWER METALS 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 POWER METALS will offset losses from the drop in POWER METALS'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 |
| POWER METALS vs. COLUMBIA SPORTSWEAR | POWER METALS vs. Dairy Farm International | POWER METALS vs. ANTA SPORTS PRODUCT | POWER METALS vs. TITANIUM TRANSPORTGROUP |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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