Correlation Between Boston Beer and Genuine Parts

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

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

Diversification Opportunities for Boston Beer and Genuine Parts

-0.29

Correlation Coefficient

Boston Beer  Genuine Parts

Very good diversification

The 3 months correlation between Boston and Genuine is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Genuine Parts Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of Boston Beer i.e., Boston Beer and Genuine Parts go up and down completely randomly.

Pair Corralation between Boston Beer and Genuine Parts

Considering the 90-day investment horizon Boston Beer is expected to under-perform the Genuine Parts. In addition to that, Boston Beer is 1.56 times more volatile than Genuine Parts Co. It trades about -0.42 of its total potential returns per unit of risk. Genuine Parts Co is currently generating about -0.35 per unit of volatility. If you would invest  12,540  in Genuine Parts Co on October 11, 2024 and sell it today you would lose (887.00) from holding Genuine Parts Co or give up 7.07% of portfolio value over 90 days.

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

Boston Beer  vs.  Genuine Parts Co

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.

Genuine Parts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genuine Parts Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Boston Beer and Genuine Parts

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

The idea behind Boston Beer and Genuine Parts Co 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.