Correlation Between Boston Beer and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Boston Beer and Coca Cola 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 Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and The Coca Cola, you can compare the effects of market volatilities on Boston Beer and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Coca Cola.
Diversification Opportunities for Boston Beer and Coca Cola
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Boston and Coca is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Boston Beer i.e., Boston Beer and Coca Cola go up and down completely randomly.
Pair Corralation between Boston Beer and Coca Cola
Considering the 90-day investment horizon Boston Beer is expected to under-perform the Coca Cola. In addition to that, Boston Beer is 2.8 times more volatile than The Coca Cola. It trades about -0.4 of its total potential returns per unit of risk. The Coca Cola is currently generating about 0.04 per unit of volatility. If you would invest 6,238 in The Coca Cola on October 23, 2024 and sell it today you would earn a total of 33.00 from holding The Coca Cola or generate 0.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. The Coca Cola
Performance |
| Timeline |
| Boston Beer |
| Coca Cola |
Boston Beer and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Coca Cola
The main advantage of trading using opposite Boston Beer and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola'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 |
| Coca Cola vs. Celsius Holdings | Coca Cola vs. Monster Beverage Corp | Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. Keurig Dr Pepper |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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