Correlation Between Boston Beer and NL Industries
Can any of the company-specific risk be diversified away by investing in both Boston Beer and NL 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 NL 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 NL Industries, you can compare the effects of market volatilities on Boston Beer and NL 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 NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and NL Industries.
Diversification Opportunities for Boston Beer and NL Industries
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Boston and NL Industries is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of Boston Beer i.e., Boston Beer and NL Industries go up and down completely randomly.
Pair Corralation between Boston Beer and NL Industries
Considering the 90-day investment horizon Boston Beer is expected to generate 3.76 times less return on investment than NL Industries. But when comparing it to its historical volatility, Boston Beer is 1.97 times less risky than NL Industries. It trades about 0.03 of its potential returns per unit of risk. NL Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 677.00 in NL Industries on September 1, 2024 and sell it today you would earn a total of 118.00 from holding NL Industries or generate 17.43% 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. NL Industries
Performance |
| Timeline |
| Boston Beer |
| NL Industries |
Boston Beer and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and NL Industries
The main advantage of trading using opposite Boston Beer and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, NL 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 NL Industries will offset losses from the drop in NL 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 |
| NL Industries vs. Atos SE | NL Industries vs. Deveron Corp | NL Industries vs. Appen Limited | NL Industries vs. Atos Origin SA |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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