Correlation Between BOSTON BEER and National Storage

Can any of the company-specific risk be diversified away by investing in both BOSTON BEER and National Storage 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 National Storage 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 National Storage Affiliates, you can compare the effects of market volatilities on BOSTON BEER and National Storage 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 National Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and National Storage.

Diversification Opportunities for BOSTON BEER and National Storage

0.72

Correlation Coefficient

BOSTON BEER  National Storage

Poor diversification

The 3 months correlation between BOSTON and National is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and National Storage Affiliates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage Aff 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 National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage Aff has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and National Storage go up and down completely randomly.

Pair Corralation between BOSTON BEER and National Storage

Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the National Storage. In addition to that, BOSTON BEER is 1.34 times more volatile than National Storage Affiliates. It trades about -0.59 of its total potential returns per unit of risk. National Storage Affiliates is currently generating about -0.2 per unit of volatility. If you would invest  3,630  in National Storage Affiliates on October 26, 2024 and sell it today you would lose (183.00) from holding National Storage Affiliates or give up 5.04% of portfolio value over 90 days.

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

BOSTON BEER A   vs.  National Storage Affiliates

BOSTON BEER A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BOSTON BEER A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

National Storage Aff

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Storage Affiliates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BOSTON BEER and National Storage

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

The idea behind BOSTON BEER A and National Storage Affiliates 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.