Correlation Between BOSTON BEER and Keyence

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

Diversification Opportunities for BOSTON BEER and Keyence

-0.58

Correlation Coefficient

BOSTON BEER  Keyence

Excellent diversification

The 3 months correlation between BOSTON and Keyence is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Keyence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyence 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 Keyence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyence has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and Keyence go up and down completely randomly.

Pair Corralation between BOSTON BEER and Keyence

Assuming the 90 days trading horizon BOSTON BEER A is expected to generate 1.13 times more return on investment than Keyence. However, BOSTON BEER is 1.13 times more volatile than Keyence. It trades about 0.09 of its potential returns per unit of risk. Keyence is currently generating about -0.05 per unit of risk. If you would invest  24,600  in BOSTON BEER A on October 10, 2024 and sell it today you would earn a total of  2,280  from holding BOSTON BEER A or generate 9.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

BOSTON BEER A   vs.  Keyence

BOSTON BEER A

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, BOSTON BEER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Keyence

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keyence has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Keyence is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BOSTON BEER and Keyence

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

The idea behind BOSTON BEER A and Keyence 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.