Correlation Between BOSTON BEER and SPARTAN STORES

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

Diversification Opportunities for BOSTON BEER and SPARTAN STORES

-0.68

Correlation Coefficient

BOSTON BEER  SPARTAN STORES

Excellent diversification

The 3 months correlation between BOSTON and SPARTAN is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and SPARTAN STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPARTAN STORES 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 SPARTAN STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPARTAN STORES has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and SPARTAN STORES go up and down completely randomly.

Pair Corralation between BOSTON BEER and SPARTAN STORES

Assuming the 90 days trading horizon BOSTON BEER is expected to generate 1.81 times less return on investment than SPARTAN STORES. But when comparing it to its historical volatility, BOSTON BEER A is 1.08 times less risky than SPARTAN STORES. It trades about 0.01 of its potential returns per unit of risk. SPARTAN STORES is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,700  in SPARTAN STORES on September 29, 2024 and sell it today you would earn a total of  60.00  from holding SPARTAN STORES or generate 3.53% return on investment over 90 days.

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

BOSTON BEER A   vs.  SPARTAN STORES

BOSTON BEER A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 9 (%) 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.

SPARTAN STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPARTAN STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with BOSTON BEER and SPARTAN STORES

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

The idea behind BOSTON BEER A and SPARTAN STORES 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.