Correlation Between Boston Beer and Tesla
Can any of the company-specific risk be diversified away by investing in both Boston Beer and Tesla 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 Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and Tesla Inc, you can compare the effects of market volatilities on Boston Beer and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Tesla.
Diversification Opportunities for Boston Beer and Tesla
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Boston and Tesla is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Boston Beer i.e., Boston Beer and Tesla go up and down completely randomly.
Pair Corralation between Boston Beer and Tesla
Considering the 90-day investment horizon Boston Beer is expected to generate 13.01 times less return on investment than Tesla. But when comparing it to its historical volatility, Boston Beer is 2.62 times less risky than Tesla. It trades about 0.03 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 17,629 in Tesla Inc on September 1, 2024 and sell it today you would earn a total of 16,887 from holding Tesla Inc or generate 95.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. Tesla Inc
Performance |
| Timeline |
| Boston Beer |
| Tesla Inc |
Boston Beer and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Tesla
The main advantage of trading using opposite Boston Beer and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla'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 |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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