Correlation Between Boston Beer and Maanshan Iron
Can any of the company-specific risk be diversified away by investing in both Boston Beer and Maanshan Iron 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 Maanshan Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and Maanshan Iron Steel, you can compare the effects of market volatilities on Boston Beer and Maanshan Iron 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 Maanshan Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Maanshan Iron.
Diversification Opportunities for Boston Beer and Maanshan Iron
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Boston and Maanshan is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Maanshan Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maanshan Iron Steel 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 Maanshan Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maanshan Iron Steel has no effect on the direction of Boston Beer i.e., Boston Beer and Maanshan Iron go up and down completely randomly.
Pair Corralation between Boston Beer and Maanshan Iron
Considering the 90-day investment horizon Boston Beer is expected to generate 0.27 times more return on investment than Maanshan Iron. However, Boston Beer is 3.75 times less risky than Maanshan Iron. It trades about 0.29 of its potential returns per unit of risk. Maanshan Iron Steel is currently generating about -0.22 per unit of risk. If you would invest 29,494 in Boston Beer on September 2, 2024 and sell it today you would earn a total of 2,130 from holding Boston Beer or generate 7.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. Maanshan Iron Steel
Performance |
| Timeline |
| Boston Beer |
| Maanshan Iron Steel |
Boston Beer and Maanshan Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Maanshan Iron
The main advantage of trading using opposite Boston Beer and Maanshan Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Maanshan Iron 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 Maanshan Iron will offset losses from the drop in Maanshan Iron's long position.| Boston Beer vs. Compania Cervecerias Unidas | Boston Beer vs. Molson Coors Brewing | Boston Beer vs. Suntory Beverage Food | Boston Beer vs. Carlsberg AS |
| Maanshan Iron vs. ArcelorMittal SA ADR | Maanshan Iron vs. Gerdau SA ADR | Maanshan Iron vs. POSCO Holdings |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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