Correlation Between BOSTON BEER and Volkswagen

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

Diversification Opportunities for BOSTON BEER and Volkswagen

-0.84

Correlation Coefficient

BOSTON BEER  Volkswagen

Pay attention - limited upside

The 3 months correlation between BOSTON and Volkswagen is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Volkswagen AG VZO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG VZO 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG VZO has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and Volkswagen go up and down completely randomly.

Pair Corralation between BOSTON BEER and Volkswagen

Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the Volkswagen. In addition to that, BOSTON BEER is 1.07 times more volatile than Volkswagen AG VZO. It trades about -0.08 of its total potential returns per unit of risk. Volkswagen AG VZO is currently generating about 0.25 per unit of volatility. If you would invest  8,218  in Volkswagen AG VZO on October 6, 2024 and sell it today you would earn a total of  464.00  from holding Volkswagen AG VZO or generate 5.65% return on investment over 90 days.

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

BOSTON BEER A   vs.  Volkswagen AG VZO

BOSTON BEER A

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 10 (%) 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.

Volkswagen AG VZO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG VZO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic 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 Volkswagen

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

The idea behind BOSTON BEER A and Volkswagen AG VZO 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.