Correlation Between BOSTON BEER and HF FOODS

Can any of the company-specific risk be diversified away by investing in both BOSTON BEER and HF FOODS 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 HF FOODS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BOSTON BEER A and HF FOODS GRP, you can compare the effects of market volatilities on BOSTON BEER and HF FOODS 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 HF FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and HF FOODS.

Diversification Opportunities for BOSTON BEER and HF FOODS

0.78

Correlation Coefficient

BOSTON BEER  HF FOODS

Poor diversification

The 3 months correlation between BOSTON and 3GX is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and HF FOODS GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HF FOODS GRP 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 A are associated (or correlated) with HF FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HF FOODS GRP has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and HF FOODS go up and down completely randomly.

Pair Corralation between BOSTON BEER and HF FOODS

Assuming the 90 days trading horizon BOSTON BEER A is expected to generate 0.52 times more return on investment than HF FOODS. However, BOSTON BEER A is 1.91 times less risky than HF FOODS. It trades about 0.16 of its potential returns per unit of risk. HF FOODS GRP is currently generating about 0.07 per unit of risk. If you would invest  24,480  in BOSTON BEER A on September 2, 2024 and sell it today you would earn a total of  4,500  from holding BOSTON BEER A or generate 18.38% return on investment over 90 days.

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

BOSTON BEER A   vs.  HF FOODS GRP

BOSTON BEER A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, BOSTON BEER exhibited solid returns over the last few months and may actually be approaching a breakup point.

HF FOODS GRP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HF FOODS GRP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HF FOODS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BOSTON BEER and HF FOODS

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

The idea behind BOSTON BEER A and HF FOODS GRP 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..