Correlation Between BOSTON BEER and Grand Canyon

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

Diversification Opportunities for BOSTON BEER and Grand Canyon

-0.4

Correlation Coefficient

BOSTON BEER  Grand Canyon

Very good diversification

The 3 months correlation between BOSTON and Grand is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Grand Canyon Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Canyon Education 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 Grand Canyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Canyon Education has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and Grand Canyon go up and down completely randomly.

Pair Corralation between BOSTON BEER and Grand Canyon

Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the Grand Canyon. In addition to that, BOSTON BEER is 1.19 times more volatile than Grand Canyon Education. It trades about -0.28 of its total potential returns per unit of risk. Grand Canyon Education is currently generating about -0.01 per unit of volatility. If you would invest  15,300  in Grand Canyon Education on December 22, 2024 and sell it today you would lose (200.00) from holding Grand Canyon Education or give up 1.31% of portfolio value over 90 days.

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

BOSTON BEER A   vs.  Grand Canyon Education

BOSTON BEER A

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Grand Canyon Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grand Canyon Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Grand Canyon is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BOSTON BEER and Grand Canyon

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

The idea behind BOSTON BEER A and Grand Canyon Education 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.