Correlation Between Big Tree and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Big Tree 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 Big Tree and Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Tree Cloud and Boston Beer, you can compare the effects of market volatilities on Big Tree 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 Big Tree with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Tree and Boston Beer.
Diversification Opportunities for Big Tree and Boston Beer
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Big and Boston is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Big Tree Cloud and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Big Tree 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 Big Tree Cloud 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 Big Tree i.e., Big Tree and Boston Beer go up and down completely randomly.
Pair Corralation between Big Tree and Boston Beer
Considering the 90-day investment horizon Big Tree Cloud is expected to generate 6.11 times more return on investment than Boston Beer. However, Big Tree is 6.11 times more volatile than Boston Beer. It trades about 0.03 of its potential returns per unit of risk. Boston Beer is currently generating about -0.01 per unit of risk. If you would invest 1,060 in Big Tree Cloud on September 2, 2024 and sell it today you would lose (772.00) from holding Big Tree Cloud or give up 72.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big Tree Cloud vs. Boston Beer
Performance |
| Timeline |
| Big Tree Cloud |
| Boston Beer |
Big Tree and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big Tree and Boston Beer
The main advantage of trading using opposite Big Tree and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Tree 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.| Big Tree vs. Vera Bradley | Big Tree vs. Lincoln Electric Holdings | Big Tree vs. Unilever PLC ADR | Big Tree vs. Inter Parfums |
| Boston Beer vs. Compania Cervecerias Unidas | Boston Beer vs. Molson Coors Brewing | Boston Beer vs. Suntory Beverage Food | Boston Beer vs. Carlsberg AS |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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