Correlation Between Big 5 and BOSTON BEER

Can any of the company-specific risk be diversified away by investing in both Big 5 and BOSTON BEER 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 Big 5 and BOSTON BEER into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big 5 Sporting and BOSTON BEER A , you can compare the effects of market volatilities on Big 5 and BOSTON BEER 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 Big 5 with a short position of BOSTON BEER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and BOSTON BEER.

Diversification Opportunities for Big 5 and BOSTON BEER

-0.61

Correlation Coefficient

Big 5  BOSTON BEER

Excellent diversification

The 3 months correlation between Big and BOSTON is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and BOSTON BEER A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOSTON BEER A and Big 5 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 Big 5 Sporting are associated (or correlated) with BOSTON BEER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOSTON BEER A has no effect on the direction of Big 5 i.e., Big 5 and BOSTON BEER go up and down completely randomly.

Pair Corralation between Big 5 and BOSTON BEER

Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the BOSTON BEER. In addition to that, Big 5 is 2.96 times more volatile than BOSTON BEER A . It trades about -0.05 of its total potential returns per unit of risk. BOSTON BEER A is currently generating about 0.06 per unit of volatility. If you would invest  26,600  in BOSTON BEER A on September 12, 2024 and sell it today you would earn a total of  3,560  from holding BOSTON BEER A or generate 13.38% return on investment over 90 days.

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

Big 5 Sporting  vs.  BOSTON BEER A

Big 5 Sporting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Big 5 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BOSTON BEER A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, BOSTON BEER exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big 5 and BOSTON BEER

The main advantage of trading using opposite Big 5 and BOSTON BEER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, BOSTON BEER 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 BOSTON BEER will offset losses from the drop in BOSTON BEER's long position.

The idea behind Big 5 Sporting and BOSTON BEER A 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.