Correlation Between Boston Beer and Cementos Pacasmayo

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

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

Diversification Opportunities for Boston Beer and Cementos Pacasmayo

0.72

Correlation Coefficient

Boston Beer  Cementos Pacasmayo

Poor diversification

The 3 months correlation between Boston and Cementos is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Cementos Pacasmayo SAA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cementos Pacasmayo SAA 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 Cementos Pacasmayo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cementos Pacasmayo SAA has no effect on the direction of Boston Beer i.e., Boston Beer and Cementos Pacasmayo go up and down completely randomly.

Pair Corralation between Boston Beer and Cementos Pacasmayo

Considering the 90-day investment horizon Boston Beer is expected to under-perform the Cementos Pacasmayo. But the stock apears to be less risky and, when comparing its historical volatility, Boston Beer is 1.46 times less risky than Cementos Pacasmayo. The stock trades about -0.36 of its potential returns per unit of risk. The Cementos Pacasmayo SAA is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  586.00  in Cementos Pacasmayo SAA on October 8, 2024 and sell it today you would lose (22.00) from holding Cementos Pacasmayo SAA or give up 3.75% of portfolio value over 90 days.

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

Boston Beer  vs.  Cementos Pacasmayo SAA

Boston Beer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Boston Beer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cementos Pacasmayo SAA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cementos Pacasmayo SAA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Cementos Pacasmayo may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Boston Beer and Cementos Pacasmayo

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

The idea behind Boston Beer and Cementos Pacasmayo SAA 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.