Correlation Between Boston Beer and Analog Devices
Can any of the company-specific risk be diversified away by investing in both Boston Beer and Analog Devices 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 Boston Beer and Analog Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and Analog Devices, you can compare the effects of market volatilities on Boston Beer and Analog Devices 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 Boston Beer with a short position of Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Analog Devices.
Diversification Opportunities for Boston Beer and Analog Devices
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Boston and Analog is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Boston Beer 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 Boston Beer are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Boston Beer i.e., Boston Beer and Analog Devices go up and down completely randomly.
Pair Corralation between Boston Beer and Analog Devices
Considering the 90-day investment horizon Boston Beer is expected to generate 0.85 times more return on investment than Analog Devices. However, Boston Beer is 1.18 times less risky than Analog Devices. It trades about 0.13 of its potential returns per unit of risk. Analog Devices is currently generating about 0.01 per unit of risk. If you would invest 28,007 in Boston Beer on September 2, 2024 and sell it today you would earn a total of 3,617 from holding Boston Beer or generate 12.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. Analog Devices
Performance |
| Timeline |
| Boston Beer |
| Analog Devices |
Boston Beer and Analog Devices Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Analog Devices
The main advantage of trading using opposite Boston Beer and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.| Boston Beer vs. Compania Cervecerias Unidas | Boston Beer vs. Molson Coors Brewing | Boston Beer vs. Suntory Beverage Food | Boston Beer vs. Carlsberg AS |
| Analog Devices vs. NXP Semiconductors NV | Analog Devices vs. Qualcomm Incorporated | Analog Devices vs. Broadcom | Analog Devices vs. Microchip Technology |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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