Correlation Between Boston Beer and Lundin Gold

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

Diversification Opportunities for Boston Beer and Lundin Gold

0.17

Correlation Coefficient

Boston Beer  Lundin Gold

Average diversification

The 3 months correlation between Boston and Lundin is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and Lundin Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Gold 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 Lundin Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Gold has no effect on the direction of Boston Beer i.e., Boston Beer and Lundin Gold go up and down completely randomly.

Pair Corralation between Boston Beer and Lundin Gold

Assuming the 90 days trading horizon The Boston Beer is expected to generate 0.73 times more return on investment than Lundin Gold. However, The Boston Beer is 1.38 times less risky than Lundin Gold. It trades about -0.26 of its potential returns per unit of risk. Lundin Gold is currently generating about -0.29 per unit of risk. If you would invest  30,340  in The Boston Beer on October 10, 2024 and sell it today you would lose (2,340) from holding The Boston Beer or give up 7.71% of portfolio value over 90 days.

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

The Boston Beer  vs.  Lundin Gold

Boston Beer

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boston Beer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Boston Beer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lundin Gold

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Lundin Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lundin Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Boston Beer and Lundin Gold

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

The idea behind The Boston Beer and Lundin Gold 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.