Correlation Between Boston Beer and BG Foods
Can any of the company-specific risk be diversified away by investing in both Boston Beer and BG Foods 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 BG Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and BG Foods, you can compare the effects of market volatilities on Boston Beer and BG Foods 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 BG Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and BG Foods.
Diversification Opportunities for Boston Beer and BG Foods
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Boston and BGS is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Boston Beer i.e., Boston Beer and BG Foods go up and down completely randomly.
Pair Corralation between Boston Beer and BG Foods
Considering the 90-day investment horizon Boston Beer is expected to generate 0.9 times more return on investment than BG Foods. However, Boston Beer is 1.11 times less risky than BG Foods. It trades about 0.06 of its potential returns per unit of risk. BG Foods is currently generating about -0.08 per unit of risk. If you would invest 25,951 in Boston Beer on August 24, 2024 and sell it today you would earn a total of 4,767 from holding Boston Beer or generate 18.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Boston Beer vs. BG Foods
Performance |
Timeline |
Boston Beer |
BG Foods |
Boston Beer and BG Foods Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Boston Beer and BG Foods
The main advantage of trading using opposite Boston Beer and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, BG Foods 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 BG Foods will offset losses from the drop in BG Foods' long position.Boston Beer vs. Molson Coors Beverage | Boston Beer vs. Fomento Economico Mexicano | Boston Beer vs. Tsingtao Brewery Co | Boston Beer vs. Carlsberg AS |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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