Correlation Between BOSTON BEER and MeVis Medical

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

Diversification Opportunities for BOSTON BEER and MeVis Medical

0.8

Correlation Coefficient

BOSTON BEER  MeVis Medical

Very poor diversification

The 3 months correlation between BOSTON and MeVis is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and MeVis Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MeVis Medical Solutions 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 MeVis Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MeVis Medical Solutions has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and MeVis Medical go up and down completely randomly.

Pair Corralation between BOSTON BEER and MeVis Medical

Assuming the 90 days trading horizon BOSTON BEER A is expected to generate 1.99 times more return on investment than MeVis Medical. However, BOSTON BEER is 1.99 times more volatile than MeVis Medical Solutions. It trades about 0.2 of its potential returns per unit of risk. MeVis Medical Solutions is currently generating about 0.1 per unit of risk. If you would invest  24,180  in BOSTON BEER A on September 14, 2024 and sell it today you would earn a total of  5,360  from holding BOSTON BEER A or generate 22.17% return on investment over 90 days.

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

BOSTON BEER A   vs.  MeVis Medical Solutions

BOSTON BEER A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, BOSTON BEER exhibited solid returns over the last few months and may actually be approaching a breakup point.

MeVis Medical Solutions

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MeVis Medical Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MeVis Medical 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 MeVis Medical

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

The idea behind BOSTON BEER A and MeVis Medical Solutions 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.