Correlation Between PENN NATL and Boston Beer
Can any of the company-specific risk be diversified away by investing in both PENN NATL 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 PENN NATL and Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PENN NATL GAMING and The Boston Beer, you can compare the effects of market volatilities on PENN NATL 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 PENN NATL with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and Boston Beer.
Diversification Opportunities for PENN NATL and Boston Beer
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between PENN and Boston is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and The Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and PENN NATL 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 PENN NATL GAMING 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 PENN NATL i.e., PENN NATL and Boston Beer go up and down completely randomly.
Pair Corralation between PENN NATL and Boston Beer
Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 1.87 times more return on investment than Boston Beer. However, PENN NATL is 1.87 times more volatile than The Boston Beer. It trades about -0.01 of its potential returns per unit of risk. The Boston Beer is currently generating about -0.34 per unit of risk. If you would invest 2,039 in PENN NATL GAMING on November 1, 2024 and sell it today you would lose (54.00) from holding PENN NATL GAMING or give up 2.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.44% |
| Values | Daily Returns |
PENN NATL GAMING vs. The Boston Beer
Performance |
| Timeline |
| PENN NATL GAMING |
| Boston Beer |
PENN NATL and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PENN NATL and Boston Beer
The main advantage of trading using opposite PENN NATL and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL 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.| PENN NATL vs. American Airlines Group | PENN NATL vs. Direct Line Insurance | PENN NATL vs. BANKINTER ADR 2007 | PENN NATL vs. Webster Financial |
| Boston Beer vs. Semiconductor Manufacturing International | Boston Beer vs. British American Tobacco | Boston Beer vs. Elmos Semiconductor SE | Boston Beer vs. SLR Investment Corp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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