Correlation Between Boston Beer and BHP Group

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

Diversification Opportunities for Boston Beer and BHP Group

0.35

Correlation Coefficient

Boston Beer  BHP Group

Weak diversification

The 3 months correlation between Boston and BHP is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited 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 BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Boston Beer i.e., Boston Beer and BHP Group go up and down completely randomly.

Pair Corralation between Boston Beer and BHP Group

Assuming the 90 days trading horizon The Boston Beer is expected to under-perform the BHP Group. In addition to that, Boston Beer is 1.44 times more volatile than BHP Group Limited. It trades about -0.6 of its total potential returns per unit of risk. BHP Group Limited is currently generating about 0.03 per unit of volatility. If you would invest  4,670  in BHP Group Limited on October 27, 2024 and sell it today you would earn a total of  30.00  from holding BHP Group Limited or generate 0.64% return on investment over 90 days.

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

The Boston Beer  vs.  BHP Group Limited

Boston Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BHP Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHP Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Boston Beer and BHP Group

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

The idea behind The Boston Beer and BHP Group Limited 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.