Correlation Between Boston Beer and Nabors Industries
Can any of the company-specific risk be diversified away by investing in both Boston Beer and Nabors 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 Nabors 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 Nabors Industries, you can compare the effects of market volatilities on Boston Beer and Nabors 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 Nabors Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Nabors Industries.
Diversification Opportunities for Boston Beer and Nabors Industries
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Boston and Nabors is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors 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 Nabors Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Industries has no effect on the direction of Boston Beer i.e., Boston Beer and Nabors Industries go up and down completely randomly.
Pair Corralation between Boston Beer and Nabors Industries
Considering the 90-day investment horizon Boston Beer is expected to generate 1.83 times less return on investment than Nabors Industries. But when comparing it to its historical volatility, Boston Beer is 2.14 times less risky than Nabors Industries. It trades about 0.11 of its potential returns per unit of risk. Nabors Industries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 7,295 in Nabors Industries on August 25, 2024 and sell it today you would earn a total of 435.00 from holding Nabors Industries or generate 5.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. Nabors Industries
Performance |
| Timeline |
| Boston Beer |
| Nabors Industries |
Boston Beer and Nabors Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Nabors Industries
The main advantage of trading using opposite Boston Beer and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Nabors 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 Nabors Industries will offset losses from the drop in Nabors 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 |
| Nabors Industries vs. Helmerich and Payne | Nabors Industries vs. Precision Drilling | Nabors Industries vs. Seadrill Limited | Nabors Industries vs. Borr Drilling |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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