Correlation Between Boston Beer and Montana Technologies

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

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

Diversification Opportunities for Boston Beer and Montana Technologies

0.09

Correlation Coefficient

Boston Beer  Montana Technologies

Significant diversification

The 3 months correlation between Boston and Montana is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Montana Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montana Technologies and Boston Beer 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 Boston Beer are associated (or correlated) with Montana Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montana Technologies has no effect on the direction of Boston Beer i.e., Boston Beer and Montana Technologies go up and down completely randomly.

Pair Corralation between Boston Beer and Montana Technologies

Considering the 90-day investment horizon Boston Beer is expected to under-perform the Montana Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Boston Beer is 4.81 times less risky than Montana Technologies. The stock trades about -0.06 of its potential returns per unit of risk. The Montana Technologies is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Montana Technologies on October 15, 2024 and sell it today you would earn a total of  75.00  from holding Montana Technologies or generate 166.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.32%
Values	Daily Returns

Boston Beer  vs.  Montana Technologies

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 latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Montana Technologies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Montana Technologies are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking indicators, Montana Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Beer and Montana Technologies

The main advantage of trading using opposite Boston Beer and Montana Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Montana Technologies 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 Montana Technologies will offset losses from the drop in Montana Technologies' long position.

The idea behind Boston Beer and Montana Technologies 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.