Correlation Between BOSTON BEER and China Resources

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

Diversification Opportunities for BOSTON BEER and China Resources

-0.73

Correlation Coefficient

BOSTON BEER  China Resources

Pay attention - limited upside

The 3 months correlation between BOSTON and China is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and China Resources Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Land 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Land has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and China Resources go up and down completely randomly.

Pair Corralation between BOSTON BEER and China Resources

Assuming the 90 days trading horizon BOSTON BEER A is expected to generate 0.74 times more return on investment than China Resources. However, BOSTON BEER A is 1.36 times less risky than China Resources. It trades about 0.11 of its potential returns per unit of risk. China Resources Land is currently generating about -0.07 per unit of risk. If you would invest  25,020  in BOSTON BEER A on October 8, 2024 and sell it today you would earn a total of  2,720  from holding BOSTON BEER A or generate 10.87% return on investment over 90 days.

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

BOSTON BEER A   vs.  China Resources Land

BOSTON BEER A

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, BOSTON BEER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Resources Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Land 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 China Resources

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

The idea behind BOSTON BEER A and China Resources Land 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.