Correlation Between Boston Beer and Air Products
Can any of the company-specific risk be diversified away by investing in both Boston Beer and Air Products 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 Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and Air Products and, you can compare the effects of market volatilities on Boston Beer and Air Products 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 Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Air Products.
Diversification Opportunities for Boston Beer and Air Products
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Boston and Air is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Boston Beer i.e., Boston Beer and Air Products go up and down completely randomly.
Pair Corralation between Boston Beer and Air Products
Considering the 90-day investment horizon Boston Beer is expected to generate 3.45 times less return on investment than Air Products. In addition to that, Boston Beer is 1.5 times more volatile than Air Products and. It trades about 0.03 of its total potential returns per unit of risk. Air Products and is currently generating about 0.13 per unit of volatility. If you would invest 23,480 in Air Products and on September 1, 2024 and sell it today you would earn a total of 9,953 from holding Air Products and or generate 42.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. Air Products and
Performance |
| Timeline |
| Boston Beer |
| Air Products |
Boston Beer and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Air Products
The main advantage of trading using opposite Boston Beer and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.| Boston Beer vs. Anheuser Busch Inbev | Boston Beer vs. Molson Coors Beverage | Boston Beer vs. Heineken NV | Boston Beer vs. Ambev SA ADR |
| Air Products vs. PPG Industries | Air Products vs. Ecolab Inc | Air Products vs. Sherwin Williams Co | Air Products vs. LyondellBasell Industries NV |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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