Correlation Between Full Motion and Boston Beer

Can any of the company-specific risk be diversified away by investing in both Full Motion 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 Full Motion and Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Full Motion Beverage and Boston Beer, you can compare the effects of market volatilities on Full Motion 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 Full Motion with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Full Motion and Boston Beer.

Diversification Opportunities for Full Motion and Boston Beer

0.68

Correlation Coefficient

Full Motion  Boston Beer

Poor diversification

The 3 months correlation between Full and Boston is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Full Motion Beverage and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Full Motion 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 Full Motion Beverage 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 Full Motion i.e., Full Motion and Boston Beer go up and down completely randomly.

Pair Corralation between Full Motion and Boston Beer

Given the investment horizon of 90 days Full Motion Beverage is expected to generate 21.0 times more return on investment than Boston Beer. However, Full Motion is 21.0 times more volatile than Boston Beer. It trades about -0.01 of its potential returns per unit of risk. Boston Beer is currently generating about -0.3 per unit of risk. If you would invest  0.70  in Full Motion Beverage on January 24, 2024 and sell it today you would lose (0.30) from holding Full Motion Beverage or give up 42.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Full Motion Beverage  vs.  Boston Beer

Full Motion Beverage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Full Motion Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak fundamental drivers, Full Motion may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Boston Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Full Motion and Boston Beer

The main advantage of trading using opposite Full Motion and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Full Motion position performs unexpectedly, Boston Beer 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 Boston Beer will offset losses from the drop in Boston Beer's long position.

The idea behind Full Motion Beverage and Boston Beer pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.