Correlation Between Boston Beer and Sports Pouch

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

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

Diversification Opportunities for Boston Beer and Sports Pouch

0.0

Correlation Coefficient

Boston Beer  Sports Pouch

Pay attention - limited upside

The 3 months correlation between Boston and Sports is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Sports Pouch Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sports Pouch Beverage 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 Sports Pouch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sports Pouch Beverage has no effect on the direction of Boston Beer i.e., Boston Beer and Sports Pouch go up and down completely randomly.

Pair Corralation between Boston Beer and Sports Pouch

Considering the 90-day investment horizon Boston Beer is expected to under-perform the Sports Pouch. But the stock apears to be less risky and, when comparing its historical volatility, Boston Beer is 5.42 times less risky than Sports Pouch. The stock trades about -0.01 of its potential returns per unit of risk. The Sports Pouch Beverage is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Sports Pouch Beverage on January 25, 2024 and sell it today you would lose (0.04) from holding Sports Pouch Beverage or give up 80.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Boston Beer  vs.  Sports Pouch Beverage

Boston Beer

Risk-Adjusted Performance

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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.

Sports Pouch Beverage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sports Pouch Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental drivers, Sports Pouch is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Boston Beer and Sports Pouch

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

The idea behind Boston Beer and Sports Pouch Beverage 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.