Correlation Between BOSTON BEER and AP Møller

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

Diversification Opportunities for BOSTON BEER and AP Møller

0.73

Correlation Coefficient

BOSTON BEER  AP Møller

Poor diversification

The 3 months correlation between BOSTON and DP4A is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Møller 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 AP Møller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Møller has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and AP Møller go up and down completely randomly.

Pair Corralation between BOSTON BEER and AP Møller

Assuming the 90 days trading horizon BOSTON BEER is expected to generate 1.42 times less return on investment than AP Møller. But when comparing it to its historical volatility, BOSTON BEER A is 1.54 times less risky than AP Møller. It trades about 0.15 of its potential returns per unit of risk. AP Mller is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  129,600  in AP Mller on September 5, 2024 and sell it today you would earn a total of  31,500  from holding AP Mller or generate 24.31% 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.  AP Mller

BOSTON BEER A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 12 (%) 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.

AP Møller

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AP Møller reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BOSTON BEER and AP Møller

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

The idea behind BOSTON BEER A and AP Mller 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.