Correlation Between Boston Beer and Alumina

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

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

Diversification Opportunities for Boston Beer and Alumina

0.1

Correlation Coefficient

Boston Beer  Alumina

Average diversification

The 3 months correlation between Boston and Alumina is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Alumina Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumina Limited 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 Alumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumina Limited has no effect on the direction of Boston Beer i.e., Boston Beer and Alumina go up and down completely randomly.

Pair Corralation between Boston Beer and Alumina

If you would invest  28,007  in Boston Beer on September 3, 2024 and sell it today you would earn a total of  3,617  from holding Boston Beer or generate 12.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Boston Beer  vs.  Alumina Limited

Boston Beer

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Boston Beer displayed solid returns over the last few months and may actually be approaching a breakup point.

Alumina Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alumina Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Alumina is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Boston Beer and Alumina

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

The idea behind Boston Beer and Alumina Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.