Correlation Between Boston Beer and WATSCO INC
Can any of the company-specific risk be diversified away by investing in both Boston Beer and WATSCO INC 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 WATSCO INC 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 WATSCO INC B, you can compare the effects of market volatilities on Boston Beer and WATSCO INC 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 WATSCO INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and WATSCO INC.
Diversification Opportunities for Boston Beer and WATSCO INC
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Boston and WATSCO is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and WATSCO INC B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WATSCO INC B 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 WATSCO INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WATSCO INC B has no effect on the direction of Boston Beer i.e., Boston Beer and WATSCO INC go up and down completely randomly.
Pair Corralation between Boston Beer and WATSCO INC
Assuming the 90 days trading horizon Boston Beer is expected to generate 15.23 times less return on investment than WATSCO INC. In addition to that, Boston Beer is 1.18 times more volatile than WATSCO INC B. It trades about 0.0 of its total potential returns per unit of risk. WATSCO INC B is currently generating about 0.06 per unit of volatility. If you would invest 32,912 in WATSCO INC B on September 14, 2024 and sell it today you would earn a total of 8,488 from holding WATSCO INC B or generate 25.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
The Boston Beer vs. WATSCO INC B
Performance |
| Timeline |
| Boston Beer |
| WATSCO INC B |
Boston Beer and WATSCO INC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and WATSCO INC
The main advantage of trading using opposite Boston Beer and WATSCO INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, WATSCO INC 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 WATSCO INC will offset losses from the drop in WATSCO INC'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 |
| WATSCO INC vs. Sixt Leasing SE | WATSCO INC vs. Ribbon Communications | WATSCO INC vs. The Boston Beer | WATSCO INC vs. Global Ship Lease |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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