Correlation Between BOSTON BEER and Apple

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

Diversification Opportunities for BOSTON BEER and Apple

0.63

Correlation Coefficient

BOSTON BEER  Apple

Poor diversification

The 3 months correlation between BOSTON and Apple is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and Apple go up and down completely randomly.

Pair Corralation between BOSTON BEER and Apple

Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the Apple. In addition to that, BOSTON BEER is 1.43 times more volatile than Apple Inc. It trades about -0.01 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.1 per unit of volatility. If you would invest  12,517  in Apple Inc on October 11, 2024 and sell it today you would earn a total of  11,063  from holding Apple Inc or generate 88.38% 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.  Apple Inc

BOSTON BEER A

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, BOSTON BEER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Apple Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Apple displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BOSTON BEER and Apple

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

The idea behind BOSTON BEER A and Apple Inc 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.