Correlation Between BOSTON BEER and BASF SE

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

Diversification Opportunities for BOSTON BEER and BASF SE

-0.33

Correlation Coefficient

BOSTON BEER  BASF SE

Very good diversification

The 3 months correlation between BOSTON and BASF is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE 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 BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and BASF SE go up and down completely randomly.

Pair Corralation between BOSTON BEER and BASF SE

Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the BASF SE. But the stock apears to be less risky and, when comparing its historical volatility, BOSTON BEER A is 1.28 times less risky than BASF SE. The stock trades about -0.09 of its potential returns per unit of risk. The BASF SE is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,130  in BASF SE on October 23, 2024 and sell it today you would lose (30.00) from holding BASF SE or give up 2.65% of portfolio value over 90 days.

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

BOSTON BEER A   vs.  BASF SE

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

BASF SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BASF SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BASF SE 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 BASF SE

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

The idea behind BOSTON BEER A and BASF SE 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.