Correlation Between Boston Beer and Cal Maine
Can any of the company-specific risk be diversified away by investing in both Boston Beer and Cal Maine 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 Cal Maine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and Cal Maine Foods, you can compare the effects of market volatilities on Boston Beer and Cal Maine 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 Cal Maine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Cal Maine.
Diversification Opportunities for Boston Beer and Cal Maine
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Boston and Cal is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Cal Maine Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cal Maine 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 Cal Maine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cal Maine Foods has no effect on the direction of Boston Beer i.e., Boston Beer and Cal Maine go up and down completely randomly.
Pair Corralation between Boston Beer and Cal Maine
Considering the 90-day investment horizon Boston Beer is expected to under-perform the Cal Maine. But the stock apears to be less risky and, when comparing its historical volatility, Boston Beer is 1.59 times less risky than Cal Maine. The stock trades about -0.14 of its potential returns per unit of risk. The Cal Maine Foods is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 8,639 in Cal Maine Foods on December 21, 2024 and sell it today you would earn a total of 233.00 from holding Cal Maine Foods or generate 2.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. Cal Maine Foods
Performance |
| Timeline |
| Boston Beer |
| Cal Maine Foods |
Boston Beer and Cal Maine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Cal Maine
The main advantage of trading using opposite Boston Beer and Cal Maine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Cal Maine 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 Cal Maine will offset losses from the drop in Cal Maine's 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 |
| Cal Maine vs. Bunge Limited | Cal Maine vs. Tyson Foods | Cal Maine vs. Dole PLC | Cal Maine vs. Adecoagro SA |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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