Correlation Between Flex and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Flex 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 Flex and Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flex and Boston Beer, you can compare the effects of market volatilities on Flex 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 Flex with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flex and Boston Beer.
Diversification Opportunities for Flex and Boston Beer
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Flex and Boston is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Flex and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Flex 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 Flex 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 Flex i.e., Flex and Boston Beer go up and down completely randomly.
Pair Corralation between Flex and Boston Beer
Given the investment horizon of 90 days Flex is expected to generate 1.54 times more return on investment than Boston Beer. However, Flex is 1.54 times more volatile than Boston Beer. It trades about 0.17 of its potential returns per unit of risk. Boston Beer is currently generating about 0.13 per unit of risk. If you would invest 3,045 in Flex on September 2, 2024 and sell it today you would earn a total of 852.00 from holding Flex or generate 27.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flex vs. Boston Beer
Performance |
| Timeline |
| Flex |
| Boston Beer |
Flex and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flex and Boston Beer
The main advantage of trading using opposite Flex and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flex 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 Flex 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. 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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