Correlation Between Old Dominion and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Old Dominion 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 Old Dominion and Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Dominion Freight and Boston Beer, you can compare the effects of market volatilities on Old Dominion 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 Old Dominion with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Dominion and Boston Beer.
Diversification Opportunities for Old Dominion and Boston Beer
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Old and Boston is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Old Dominion 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 Old Dominion Freight 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 Old Dominion i.e., Old Dominion and Boston Beer go up and down completely randomly.
Pair Corralation between Old Dominion and Boston Beer
Given the investment horizon of 90 days Old Dominion Freight is expected to generate 1.45 times more return on investment than Boston Beer. However, Old Dominion is 1.45 times more volatile than Boston Beer. It trades about 0.11 of its potential returns per unit of risk. Boston Beer is currently generating about 0.15 per unit of risk. If you would invest 19,394 in Old Dominion Freight on August 28, 2024 and sell it today you would earn a total of 3,117 from holding Old Dominion Freight or generate 16.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Dominion Freight vs. Boston Beer
Performance |
| Timeline |
| Old Dominion Freight |
| Boston Beer |
Old Dominion and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Dominion and Boston Beer
The main advantage of trading using opposite Old Dominion and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Dominion 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.| Old Dominion vs. ArcBest Corp | Old Dominion vs. Marten Transport | Old Dominion vs. Werner Enterprises | Old Dominion vs. Knight Transportation |
| 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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