Correlation Between Insteel Industries and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Insteel Industries 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 Insteel Industries and Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insteel Industries and Boston Beer, you can compare the effects of market volatilities on Insteel Industries 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 Insteel Industries with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insteel Industries and Boston Beer.
Diversification Opportunities for Insteel Industries and Boston Beer
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Insteel and Boston is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Insteel Industries 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 Insteel Industries 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 Insteel Industries i.e., Insteel Industries and Boston Beer go up and down completely randomly.
Pair Corralation between Insteel Industries and Boston Beer
Given the investment horizon of 90 days Insteel Industries is expected to under-perform the Boston Beer. But the stock apears to be less risky and, when comparing its historical volatility, Insteel Industries is 1.16 times less risky than Boston Beer. The stock trades about -0.03 of its potential returns per unit of risk. The Boston Beer is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 26,820 in Boston Beer on September 3, 2024 and sell it today you would earn a total of 4,804 from holding Boston Beer or generate 17.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insteel Industries vs. Boston Beer
Performance |
| Timeline |
| Insteel Industries |
| Boston Beer |
Insteel Industries and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insteel Industries and Boston Beer
The main advantage of trading using opposite Insteel Industries and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries 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.| Insteel Industries vs. Mayville Engineering Co | Insteel Industries vs. Gulf Island Fabrication | Insteel Industries vs. ESAB Corp | Insteel Industries vs. Northwest Pipe |
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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