Correlation Between Boston Beer and Bridgestone
Can any of the company-specific risk be diversified away by investing in both Boston Beer and Bridgestone 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 Bridgestone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Boston Beer and Bridgestone, you can compare the effects of market volatilities on Boston Beer and Bridgestone 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 Bridgestone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Bridgestone.
Diversification Opportunities for Boston Beer and Bridgestone
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Boston and Bridgestone is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone 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 The Boston Beer are associated (or correlated) with Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of Boston Beer i.e., Boston Beer and Bridgestone go up and down completely randomly.
Pair Corralation between Boston Beer and Bridgestone
Assuming the 90 days trading horizon The Boston Beer is expected to under-perform the Bridgestone. In addition to that, Boston Beer is 1.22 times more volatile than Bridgestone. It trades about -0.26 of its total potential returns per unit of risk. Bridgestone is currently generating about -0.05 per unit of volatility. If you would invest 3,305 in Bridgestone on October 10, 2024 and sell it today you would lose (51.00) from holding Bridgestone or give up 1.54% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 94.44% |
Values | Daily Returns |
The Boston Beer vs. Bridgestone
Performance |
Timeline |
Boston Beer |
Bridgestone |
Boston Beer and Bridgestone Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Boston Beer and Bridgestone
The main advantage of trading using opposite Boston Beer and Bridgestone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Bridgestone 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 Bridgestone will offset losses from the drop in Bridgestone's long position.Boston Beer vs. CHEMICAL INDUSTRIES | Boston Beer vs. Teradata Corp | Boston Beer vs. NTT DATA | Boston Beer vs. X FAB Silicon Foundries |
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Check out your portfolio center.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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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