Correlation Between BOSTON BEER and Lundin Mining

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

Diversification Opportunities for BOSTON BEER and Lundin Mining

0.1

Correlation Coefficient

BOSTON BEER  Lundin Mining

Average diversification

The 3 months correlation between BOSTON and Lundin is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Lundin Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining 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 Lundin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Mining has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and Lundin Mining go up and down completely randomly.

Pair Corralation between BOSTON BEER and Lundin Mining

Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the Lundin Mining. But the stock apears to be less risky and, when comparing its historical volatility, BOSTON BEER A is 1.29 times less risky than Lundin Mining. The stock trades about -0.03 of its potential returns per unit of risk. The Lundin Mining is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  599.00  in Lundin Mining on October 22, 2024 and sell it today you would earn a total of  224.00  from holding Lundin Mining or generate 37.4% return on investment over 90 days.

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

BOSTON BEER A   vs.  Lundin Mining

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 fragile 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.

Lundin Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lundin Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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 Lundin Mining

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

The idea behind BOSTON BEER A and Lundin Mining 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.