Correlation Between Chuangs China and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Chuangs China 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 Chuangs China and Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chuangs China Investments and The Boston Beer, you can compare the effects of market volatilities on Chuangs China 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 Chuangs China with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chuangs China and Boston Beer.
Diversification Opportunities for Chuangs China and Boston Beer
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Chuangs and Boston is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments and The Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Chuangs China 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 Chuangs China Investments 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 Chuangs China i.e., Chuangs China and Boston Beer go up and down completely randomly.
Pair Corralation between Chuangs China and Boston Beer
Assuming the 90 days horizon Chuangs China is expected to generate 5.6 times less return on investment than Boston Beer. But when comparing it to its historical volatility, Chuangs China Investments is 1.34 times less risky than Boston Beer. It trades about 0.01 of its potential returns per unit of risk. The Boston Beer is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 27,260 in The Boston Beer on September 3, 2024 and sell it today you would earn a total of 2,420 from holding The Boston Beer or generate 8.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chuangs China Investments vs. The Boston Beer
Performance |
| Timeline |
| Chuangs China Investments |
| Boston Beer |
Chuangs China and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chuangs China and Boston Beer
The main advantage of trading using opposite Chuangs China and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chuangs China 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.| Chuangs China vs. Treasury Wine Estates | Chuangs China vs. GigaMedia | Chuangs China vs. NAKED WINES PLC | Chuangs China vs. Tencent Music Entertainment |
| Boston Beer vs. Globe Trade Centre | Boston Beer vs. RETAIL FOOD GROUP | Boston Beer vs. SIDETRADE EO 1 | Boston Beer vs. The Trade Desk |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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