Correlation Between Boston Beer and Gap,

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

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

Diversification Opportunities for Boston Beer and Gap,

0.49

Correlation Coefficient

Boston Beer  Gap,

Very weak diversification

The 3 months correlation between Boston and Gap, is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Boston Beer i.e., Boston Beer and Gap, go up and down completely randomly.

Pair Corralation between Boston Beer and Gap,

Considering the 90-day investment horizon Boston Beer is expected to under-perform the Gap,. But the stock apears to be less risky and, when comparing its historical volatility, Boston Beer is 1.17 times less risky than Gap,. The stock trades about -0.42 of its potential returns per unit of risk. The The Gap, is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  2,534  in The Gap, on October 11, 2024 and sell it today you would lose (153.00) from holding The Gap, or give up 6.04% of portfolio value over 90 days.

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

Boston Beer  vs.  The Gap,

Boston Beer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Boston Beer is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Gap,

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Boston Beer and Gap,

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

The idea behind Boston Beer and The Gap, 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.