Correlation Between Boston Beer and SAN MIGUEL

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

Diversification Opportunities for Boston Beer and SAN MIGUEL

-0.57

Correlation Coefficient

Boston Beer  SAN MIGUEL

Excellent diversification

The 3 months correlation between Boston and SAN is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and SAN MIGUEL BREWERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAN MIGUEL BREWERY 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 SAN MIGUEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAN MIGUEL BREWERY has no effect on the direction of Boston Beer i.e., Boston Beer and SAN MIGUEL go up and down completely randomly.

Pair Corralation between Boston Beer and SAN MIGUEL

Assuming the 90 days trading horizon The Boston Beer is expected to generate 0.35 times more return on investment than SAN MIGUEL. However, The Boston Beer is 2.82 times less risky than SAN MIGUEL. It trades about 0.14 of its potential returns per unit of risk. SAN MIGUEL BREWERY is currently generating about -0.01 per unit of risk. If you would invest  24,620  in The Boston Beer on October 8, 2024 and sell it today you would earn a total of  3,380  from holding The Boston Beer or generate 13.73% return on investment over 90 days.

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

The Boston Beer  vs.  SAN MIGUEL BREWERY

Boston Beer

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Boston Beer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Boston Beer reported solid returns over the last few months and may actually be approaching a breakup point.

SAN MIGUEL BREWERY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAN MIGUEL BREWERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SAN MIGUEL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Boston Beer and SAN MIGUEL

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

The idea behind The Boston Beer and SAN MIGUEL BREWERY 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.