Correlation Between Boston Beer and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Boston Beer and Fast Retailing 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 Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and Fast Retailing Co, you can compare the effects of market volatilities on Boston Beer and Fast Retailing 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 Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Fast Retailing.
Diversification Opportunities for Boston Beer and Fast Retailing
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Boston and Fast is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Boston Beer i.e., Boston Beer and Fast Retailing go up and down completely randomly.
Pair Corralation between Boston Beer and Fast Retailing
Considering the 90-day investment horizon Boston Beer is expected to under-perform the Fast Retailing. But the stock apears to be less risky and, when comparing its historical volatility, Boston Beer is 6.93 times less risky than Fast Retailing. The stock trades about 0.0 of its potential returns per unit of risk. The Fast Retailing Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 61,000 in Fast Retailing Co on September 3, 2024 and sell it today you would lose (28,935) from holding Fast Retailing Co or give up 47.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 75.96% |
| Values | Daily Returns |
Boston Beer vs. Fast Retailing Co
Performance |
| Timeline |
| Boston Beer |
| Fast Retailing |
Boston Beer and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Fast Retailing
The main advantage of trading using opposite Boston Beer and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Fast Retailing 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 Fast Retailing will offset losses from the drop in Fast Retailing'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 |
| Fast Retailing vs. Industria de Diseno | Fast Retailing vs. Aritzia | Fast Retailing vs. Shoe Carnival | Fast Retailing vs. Genesco |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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