Correlation Between BOSTON BEER and INTER CARS

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

Diversification Opportunities for BOSTON BEER and INTER CARS

-0.09

Correlation Coefficient

BOSTON BEER  INTER CARS

Good diversification

The 3 months correlation between BOSTON and INTER is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS SA 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 INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and INTER CARS go up and down completely randomly.

Pair Corralation between BOSTON BEER and INTER CARS

Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the INTER CARS. But the stock apears to be less risky and, when comparing its historical volatility, BOSTON BEER A is 1.09 times less risky than INTER CARS. The stock trades about 0.0 of its potential returns per unit of risk. The INTER CARS SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,337  in INTER CARS SA on October 4, 2024 and sell it today you would earn a total of  2,643  from holding INTER CARS SA or generate 28.31% return on investment over 90 days.

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

BOSTON BEER A   vs.  INTER CARS SA

BOSTON BEER A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 9 (%) 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.

INTER CARS SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INTER CARS SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, INTER CARS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BOSTON BEER and INTER CARS

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

The idea behind BOSTON BEER A and INTER CARS SA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..