Correlation Between Boston Beer and Insteel Industries
Can any of the company-specific risk be diversified away by investing in both Boston Beer and Insteel Industries 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 Insteel Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and Insteel Industries, you can compare the effects of market volatilities on Boston Beer and Insteel Industries 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 Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Insteel Industries.
Diversification Opportunities for Boston Beer and Insteel Industries
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Boston and Insteel is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries 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 Insteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insteel Industries has no effect on the direction of Boston Beer i.e., Boston Beer and Insteel Industries go up and down completely randomly.
Pair Corralation between Boston Beer and Insteel Industries
Considering the 90-day investment horizon Boston Beer is expected to generate 1.12 times less return on investment than Insteel Industries. But when comparing it to its historical volatility, Boston Beer is 2.03 times less risky than Insteel Industries. It trades about 0.34 of its potential returns per unit of risk. Insteel Industries is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,697 in Insteel Industries on September 1, 2024 and sell it today you would earn a total of 251.00 from holding Insteel Industries or generate 9.31% 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. Insteel Industries
Performance |
| Timeline |
| Boston Beer |
| Insteel Industries |
Boston Beer and Insteel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Insteel Industries
The main advantage of trading using opposite Boston Beer and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Insteel Industries 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 Insteel Industries will offset losses from the drop in Insteel Industries' 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 |
| Insteel Industries vs. Mayville Engineering Co | Insteel Industries vs. Gulf Island Fabrication | Insteel Industries vs. ESAB Corp | Insteel Industries vs. Northwest Pipe |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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