Correlation Between Premier African and Boston Beer

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

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

Diversification Opportunities for Premier African and Boston Beer

0.76

Correlation Coefficient

Premier African  Boston Beer

Poor diversification

The 3 months correlation between Premier and Boston is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Premier African Minerals and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Premier African 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 Premier African Minerals 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 Premier African i.e., Premier African and Boston Beer go up and down completely randomly.

Pair Corralation between Premier African and Boston Beer

Assuming the 90 days horizon Premier African Minerals is expected to under-perform the Boston Beer. In addition to that, Premier African is 2.15 times more volatile than Boston Beer. It trades about -0.23 of its total potential returns per unit of risk. Boston Beer is currently generating about -0.37 per unit of volatility. If you would invest  32,247  in Boston Beer on October 9, 2024 and sell it today you would lose (3,331) from holding Boston Beer or give up 10.33% of portfolio value over 90 days.

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

Premier African Minerals  vs.  Boston Beer

Premier African Minerals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Premier African Minerals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Premier African reported solid returns over the last few months and may actually be approaching a breakup point.

Boston Beer

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Boston Beer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Premier African and Boston Beer

The main advantage of trading using opposite Premier African and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier African 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 Premier African Minerals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.