Correlation Between Boston Beer and ConAgra Foods

Can any of the company-specific risk be diversified away by investing in both Boston Beer and ConAgra 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 ConAgra 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 ConAgra Foods, you can compare the effects of market volatilities on Boston Beer and ConAgra 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 ConAgra Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and ConAgra Foods.

Diversification Opportunities for Boston Beer and ConAgra Foods

-0.77

Correlation Coefficient

Boston Beer  ConAgra Foods

Pay attention - limited upside

The 3 months correlation between Boston and ConAgra is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra 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 ConAgra Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConAgra Foods has no effect on the direction of Boston Beer i.e., Boston Beer and ConAgra Foods go up and down completely randomly.

Pair Corralation between Boston Beer and ConAgra Foods

Considering the 90-day investment horizon Boston Beer is expected to generate 1.19 times more return on investment than ConAgra Foods. However, Boston Beer is 1.19 times more volatile than ConAgra Foods. It trades about 0.17 of its potential returns per unit of risk. ConAgra Foods is currently generating about -0.23 per unit of risk. If you would invest  29,878  in Boston Beer on August 30, 2024 and sell it today you would earn a total of  1,490  from holding Boston Beer or generate 4.99% return on investment over 90 days.

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

Boston Beer  vs.  ConAgra Foods

Boston Beer

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Boston Beer displayed solid returns over the last few months and may actually be approaching a breakup point.

ConAgra Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ConAgra Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Boston Beer and ConAgra Foods

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

The idea behind Boston Beer and ConAgra 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.