Correlation Between Boston Beer and BG Foods

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

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

Diversification Opportunities for Boston Beer and BG Foods

0.23

Correlation Coefficient

Boston Beer  BG Foods

Modest diversification

The 3 months correlation between Boston and BGS is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Boston Beer i.e., Boston Beer and BG Foods go up and down completely randomly.

Pair Corralation between Boston Beer and BG Foods

Considering the 90-day investment horizon Boston Beer is expected to under-perform the BG Foods. But the stock apears to be less risky and, when comparing its historical volatility, Boston Beer is 1.43 times less risky than BG Foods. The stock trades about -0.19 of its potential returns per unit of risk. The BG Foods is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  694.00  in BG Foods on December 26, 2024 and sell it today you would lose (34.00) from holding BG Foods or give up 4.9% of portfolio value over 90 days.

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

Boston Beer  vs.  BG Foods

Boston Beer

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

BG Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days BG Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, BG Foods is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Boston Beer and BG Foods

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

The idea behind Boston Beer and BG Foods 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.