Correlation Between Boston Beer and Willamette Valley
Can any of the company-specific risk be diversified away by investing in both Boston Beer and Willamette Valley 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 Willamette Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Beer and Willamette Valley Vineyards, you can compare the effects of market volatilities on Boston Beer and Willamette Valley 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 Willamette Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Willamette Valley.
Diversification Opportunities for Boston Beer and Willamette Valley
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Boston and Willamette is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley 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 Willamette Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willamette Valley has no effect on the direction of Boston Beer i.e., Boston Beer and Willamette Valley go up and down completely randomly.
Pair Corralation between Boston Beer and Willamette Valley
Considering the 90-day investment horizon Boston Beer is expected to generate 0.94 times more return on investment than Willamette Valley. However, Boston Beer is 1.07 times less risky than Willamette Valley. It trades about 0.18 of its potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.12 per unit of risk. If you would invest 29,596 in Boston Beer on August 26, 2024 and sell it today you would earn a total of 1,684 from holding Boston Beer or generate 5.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boston Beer vs. Willamette Valley Vineyards
Performance |
| Timeline |
| Boston Beer |
| Willamette Valley |
Boston Beer and Willamette Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boston Beer and Willamette Valley
The main advantage of trading using opposite Boston Beer and Willamette Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Willamette Valley 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 Willamette Valley will offset losses from the drop in Willamette Valley'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 |
| Willamette Valley vs. Naked Wines plc | Willamette Valley vs. Andrew Peller Limited | Willamette Valley vs. Iconic Brands | Willamette Valley vs. Naked Wines plc |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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