Correlation Between Boston Beer and Carlsberg

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

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

Diversification Opportunities for Boston Beer and Carlsberg

-0.84

Correlation Coefficient

Boston Beer  Carlsberg

Pay attention - limited upside

The 3 months correlation between Boston and Carlsberg is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg AS 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 Carlsberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg AS has no effect on the direction of Boston Beer i.e., Boston Beer and Carlsberg go up and down completely randomly.

Pair Corralation between Boston Beer and Carlsberg

Considering the 90-day investment horizon Boston Beer is expected to generate 0.91 times more return on investment than Carlsberg. However, Boston Beer is 1.09 times less risky than Carlsberg. It trades about 0.13 of its potential returns per unit of risk. Carlsberg AS is currently generating about -0.1 per unit of risk. 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 Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Boston Beer  vs.  Carlsberg AS

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.

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Boston Beer and Carlsberg

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

The idea behind Boston Beer and Carlsberg AS 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.