Can any of the company-specific risk be diversified away by investing in both Sharplink Gaming and Boston Beer 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 Sharplink Gaming and Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sharplink Gaming and Boston Beer, you can compare the effects of market volatilities on Sharplink Gaming and Boston Beer 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 Sharplink Gaming with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sharplink Gaming and Boston Beer.
Diversification Opportunities for Sharplink Gaming and Boston Beer
The 3 months correlation between Sharplink and Boston is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sharplink Gaming and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Sharplink Gaming 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 Sharplink Gaming are associated (or correlated) with Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Sharplink Gaming i.e., Sharplink Gaming and Boston Beer go up and down completely randomly.
Pair Corralation between Sharplink Gaming and Boston Beer
Given the investment horizon of 90 days Sharplink Gaming is expected to under-perform the Boston Beer. In addition to that, Sharplink Gaming is 2.12 times more volatile than Boston Beer. It trades about -0.04 of its total potential returns per unit of risk. Boston Beer is currently generating about -0.02 per unit of volatility. If you would invest 34,438 in Boston Beer on March 6, 2024 and sell it today you would lose (4,162) from holding Boston Beer or give up 12.09% of portfolio value over 90 days.
Over the last 90 days Sharplink Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Boston Beer is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.