Correlation Between Dow and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Dow 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 Dow and Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Inc and Boston Beer, you can compare the effects of market volatilities on Dow 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 Dow with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow and Boston Beer.
Diversification Opportunities for Dow and Boston Beer
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dow and Boston is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dow Inc and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Dow 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 Dow Inc 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 Dow i.e., Dow and Boston Beer go up and down completely randomly.
Pair Corralation between Dow and Boston Beer
Considering the 90-day investment horizon Dow Inc is expected to under-perform the Boston Beer. In addition to that, Dow is 1.09 times more volatile than Boston Beer. It trades about -0.29 of its total potential returns per unit of risk. Boston Beer is currently generating about 0.1 per unit of volatility. If you would invest 30,433 in Boston Beer on August 27, 2024 and sell it today you would earn a total of 847.00 from holding Boston Beer or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Inc vs. Boston Beer
Performance |
| Timeline |
| Dow Inc |
| Boston Beer |
Dow and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow and Boston Beer
The main advantage of trading using opposite Dow and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 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 Dow Inc 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. Budweiser Brewing | Boston Beer vs. Anheuser Busch InBev SANV | Boston Beer vs. Ambev SA ADR | Boston Beer vs. Fomento Economico Mexicano |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |