Correlation Between NORTHEAST UTILITIES and Boston Beer

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

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

Diversification Opportunities for NORTHEAST UTILITIES and Boston Beer

-0.31

Correlation Coefficient

NORTHEAST UTILITIES  Boston Beer

Very good diversification

The 3 months correlation between NORTHEAST and Boston is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and The Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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 NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and Boston Beer go up and down completely randomly.

Pair Corralation between NORTHEAST UTILITIES and Boston Beer

Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 0.78 times more return on investment than Boston Beer. However, NORTHEAST UTILITIES is 1.28 times less risky than Boston Beer. It trades about -0.13 of its potential returns per unit of risk. The Boston Beer is currently generating about -0.26 per unit of risk. If you would invest  5,627  in NORTHEAST UTILITIES on October 10, 2024 and sell it today you would lose (177.00) from holding NORTHEAST UTILITIES or give up 3.15% of portfolio value over 90 days.

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

NORTHEAST UTILITIES  vs.  The Boston Beer

NORTHEAST UTILITIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORTHEAST UTILITIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, NORTHEAST UTILITIES is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Boston Beer

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boston Beer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Boston Beer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NORTHEAST UTILITIES and Boston Beer

The main advantage of trading using opposite NORTHEAST UTILITIES and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.