Correlation Between Bunge and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Bunge and Boston Beer 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 Bunge and Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bunge Limited and Boston Beer, you can compare the effects of market volatilities on Bunge and Boston Beer 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 Bunge with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunge and Boston Beer.
Diversification Opportunities for Bunge and Boston Beer
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bunge and Boston is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Bunge 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 Bunge Limited are associated (or correlated) with Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Bunge i.e., Bunge and Boston Beer go up and down completely randomly.
Pair Corralation between Bunge and Boston Beer
Allowing for the 90-day total investment horizon Bunge Limited is expected to under-perform the Boston Beer. But the stock apears to be less risky and, when comparing its historical volatility, Bunge Limited is 1.08 times less risky than Boston Beer. The stock trades about -0.12 of its potential returns per unit of risk. The Boston Beer is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 28,048 in Boston Beer on August 24, 2024 and sell it today you would earn a total of 2,670 from holding Boston Beer or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bunge Limited vs. Boston Beer
Performance |
| Timeline |
| Bunge Limited |
| Boston Beer |
Bunge and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bunge and Boston Beer
The main advantage of trading using opposite Bunge and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge position performs unexpectedly, Boston Beer 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 Boston Beer will offset losses from the drop in Boston Beer's long position.The idea behind Bunge Limited and Boston Beer pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Boston Beer vs. Anheuser Busch Inbev | Boston Beer vs. Molson Coors Beverage | Boston Beer vs. Heineken NV | Boston Beer vs. Ambev SA ADR |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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