Correlation Between Critical Metals and Boston Beer

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

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

Diversification Opportunities for Critical Metals and Boston Beer

-0.2

Correlation Coefficient

Critical Metals  Boston Beer

Good diversification

The 3 months correlation between Critical and Boston is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Critical Metals Corp and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Critical Metals 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 Critical Metals Corp 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 Critical Metals i.e., Critical Metals and Boston Beer go up and down completely randomly.

Pair Corralation between Critical Metals and Boston Beer

Given the investment horizon of 90 days Critical Metals Corp is expected to generate 4.06 times more return on investment than Boston Beer. However, Critical Metals is 4.06 times more volatile than Boston Beer. It trades about 0.03 of its potential returns per unit of risk. Boston Beer is currently generating about 0.02 per unit of risk. If you would invest  1,079  in Critical Metals Corp on September 12, 2024 and sell it today you would lose (311.00) from holding Critical Metals Corp or give up 28.82% of portfolio value over 90 days.

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

Critical Metals Corp  vs.  Boston Beer

Critical Metals Corp

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Critical Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating primary indicators, Critical Metals disclosed solid returns over the last few months and may actually be approaching a breakup point.

Boston Beer

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Boston Beer displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Critical Metals and Boston Beer

The main advantage of trading using opposite Critical Metals and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Critical Metals 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 Critical Metals Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.