Correlation Between Boston Beer and US Physical

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

Diversification Opportunities for Boston Beer and US Physical

0.89

Correlation Coefficient

Boston Beer  US Physical

Very poor diversification

The 3 months correlation between Boston and UPH is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and US Physical Therapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Physical Therapy 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 US Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Physical Therapy has no effect on the direction of Boston Beer i.e., Boston Beer and US Physical go up and down completely randomly.

Pair Corralation between Boston Beer and US Physical

Assuming the 90 days trading horizon Boston Beer is expected to generate 4.92 times less return on investment than US Physical. But when comparing it to its historical volatility, The Boston Beer is 1.85 times less risky than US Physical. It trades about 0.05 of its potential returns per unit of risk. US Physical Therapy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,511  in US Physical Therapy on October 6, 2024 and sell it today you would earn a total of  1,039  from holding US Physical Therapy or generate 13.83% return on investment over 90 days.

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

The Boston Beer  vs.  US Physical Therapy

Boston Beer

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boston Beer are ranked lower than 14 (%) 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.

US Physical Therapy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Physical Therapy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, US Physical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Beer and US Physical

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

The idea behind The Boston Beer and US Physical Therapy 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.