Correlation Between Boston Beer and Celsius Holdings

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

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

Diversification Opportunities for Boston Beer and Celsius Holdings

-0.68

Correlation Coefficient

Boston Beer  Celsius Holdings

Excellent diversification

The 3 months correlation between Boston and Celsius is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Celsius Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celsius Holdings 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 Celsius Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celsius Holdings has no effect on the direction of Boston Beer i.e., Boston Beer and Celsius Holdings go up and down completely randomly.

Pair Corralation between Boston Beer and Celsius Holdings

Considering the 90-day investment horizon Boston Beer is expected to generate 2.96 times less return on investment than Celsius Holdings. But when comparing it to its historical volatility, Boston Beer is 1.56 times less risky than Celsius Holdings. It trades about 0.01 of its potential returns per unit of risk. Celsius Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,501  in Celsius Holdings on September 15, 2024 and sell it today you would lose (322.00) from holding Celsius Holdings or give up 9.2% of portfolio value over 90 days.

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

Boston Beer  vs.  Celsius Holdings

Boston Beer

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 12 (%) 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.

Celsius Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Celsius Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Celsius Holdings is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Boston Beer and Celsius Holdings

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

The idea behind Boston Beer and Celsius Holdings 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.