Correlation Between Boston Beer and Expand Energy

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

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

Diversification Opportunities for Boston Beer and Expand Energy

-0.66

Correlation Coefficient

Boston Beer  Expand Energy

Excellent diversification

The 3 months correlation between Boston and Expand is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Expand Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expand Energy 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 Expand Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expand Energy has no effect on the direction of Boston Beer i.e., Boston Beer and Expand Energy go up and down completely randomly.

Pair Corralation between Boston Beer and Expand Energy

Considering the 90-day investment horizon Boston Beer is expected to under-perform the Expand Energy. In addition to that, Boston Beer is 1.18 times more volatile than Expand Energy. It trades about -0.2 of its total potential returns per unit of risk. Expand Energy is currently generating about 0.14 per unit of volatility. If you would invest  9,564  in Expand Energy on December 25, 2024 and sell it today you would earn a total of  1,346  from holding Expand Energy or generate 14.07% 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.  Expand Energy

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.

Expand Energy

Risk-Adjusted Performance

OK

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

Pair Trading with Boston Beer and Expand Energy

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

The idea behind Boston Beer and Expand Energy 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.