Correlation Between Genuine Parts and Boston Beer

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

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

Diversification Opportunities for Genuine Parts and Boston Beer

0.28

Correlation Coefficient

Genuine Parts  Boston Beer

Modest diversification

The 3 months correlation between Genuine and Boston is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts Co and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Genuine Parts 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 Genuine Parts Co 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 Genuine Parts i.e., Genuine Parts and Boston Beer go up and down completely randomly.

Pair Corralation between Genuine Parts and Boston Beer

Considering the 90-day investment horizon Genuine Parts Co is expected to generate 0.44 times more return on investment than Boston Beer. However, Genuine Parts Co is 2.28 times less risky than Boston Beer. It trades about 0.1 of its potential returns per unit of risk. Boston Beer is currently generating about -0.56 per unit of risk. If you would invest  11,655  in Genuine Parts Co on October 26, 2024 and sell it today you would earn a total of  177.00  from holding Genuine Parts Co or generate 1.52% return on investment over 90 days.

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

Genuine Parts Co  vs.  Boston Beer

Genuine Parts

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Genuine Parts Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Genuine Parts is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Genuine Parts and Boston Beer

The main advantage of trading using opposite Genuine Parts and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genuine Parts 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 Genuine Parts Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.