Correlation Between Boston Beer and Wheaton Precious

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

Diversification Opportunities for Boston Beer and Wheaton Precious

0.52

Correlation Coefficient

Boston Beer  Wheaton Precious

Very weak diversification

The 3 months correlation between Boston and Wheaton is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious Metals 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 Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of Boston Beer i.e., Boston Beer and Wheaton Precious go up and down completely randomly.

Pair Corralation between Boston Beer and Wheaton Precious

Assuming the 90 days trading horizon Boston Beer is expected to generate 2.54 times less return on investment than Wheaton Precious. But when comparing it to its historical volatility, The Boston Beer is 1.94 times less risky than Wheaton Precious. It trades about 0.07 of its potential returns per unit of risk. Wheaton Precious Metals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,629  in Wheaton Precious Metals on September 17, 2024 and sell it today you would earn a total of  207.00  from holding Wheaton Precious Metals or generate 3.68% return on investment over 90 days.

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

The Boston Beer  vs.  Wheaton Precious Metals

Boston Beer

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boston Beer are ranked lower than 15 (%) 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.

Wheaton Precious Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Wheaton Precious is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Boston Beer and Wheaton Precious

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

The idea behind The Boston Beer and Wheaton Precious Metals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.