Correlation Between BW LPG and Boston Beer

Can any of the company-specific risk be diversified away by investing in both BW LPG 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 BW LPG and Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BW LPG Limited and Boston Beer, you can compare the effects of market volatilities on BW LPG 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 BW LPG with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW LPG and Boston Beer.

Diversification Opportunities for BW LPG and Boston Beer

-0.6

Correlation Coefficient

BW LPG  Boston Beer

Excellent diversification

The 3 months correlation between BWLP and Boston is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding BW LPG Limited and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and BW LPG 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 BW LPG Limited 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 has no effect on the direction of BW LPG i.e., BW LPG and Boston Beer go up and down completely randomly.

Pair Corralation between BW LPG and Boston Beer

Given the investment horizon of 90 days BW LPG Limited is expected to generate 1.85 times more return on investment than Boston Beer. However, BW LPG is 1.85 times more volatile than Boston Beer. It trades about 0.09 of its potential returns per unit of risk. Boston Beer is currently generating about -0.48 per unit of risk. If you would invest  1,090  in BW LPG Limited on October 10, 2024 and sell it today you would earn a total of  49.00  from holding BW LPG Limited or generate 4.5% return on investment over 90 days.

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

BW LPG Limited  vs.  Boston Beer

BW LPG Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW LPG Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Boston Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Boston Beer is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BW LPG and Boston Beer

The main advantage of trading using opposite BW LPG and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW LPG 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 BW LPG Limited and Boston Beer 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.