Correlation Between RETAIL FOOD and Boston Beer

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

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

Diversification Opportunities for RETAIL FOOD and Boston Beer

0.72

Correlation Coefficient

RETAIL FOOD  Boston Beer

Poor diversification

The 3 months correlation between RETAIL and Boston is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and The Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and RETAIL FOOD 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 RETAIL FOOD GROUP 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 RETAIL FOOD i.e., RETAIL FOOD and Boston Beer go up and down completely randomly.

Pair Corralation between RETAIL FOOD and Boston Beer

Assuming the 90 days trading horizon RETAIL FOOD is expected to generate 2.79 times less return on investment than Boston Beer. In addition to that, RETAIL FOOD is 1.2 times more volatile than The Boston Beer. It trades about 0.05 of its total potential returns per unit of risk. The Boston Beer is currently generating about 0.16 per unit of volatility. If you would invest  25,280  in The Boston Beer on September 3, 2024 and sell it today you would earn a total of  4,400  from holding The Boston Beer or generate 17.41% return on investment over 90 days.

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

RETAIL FOOD GROUP  vs.  The Boston Beer

RETAIL FOOD GROUP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RETAIL FOOD GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, RETAIL FOOD is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Boston Beer

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boston Beer are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Boston Beer reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RETAIL FOOD and Boston Beer

The main advantage of trading using opposite RETAIL FOOD and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RETAIL FOOD 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 RETAIL FOOD GROUP and The 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 Commodity Directory module to find actively traded commodities issued by global exchanges.