Correlation Between Boston Beer and WK Kellogg

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

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

Diversification Opportunities for Boston Beer and WK Kellogg

0.45

Correlation Coefficient

Boston Beer  WK Kellogg

Very weak diversification

The 3 months correlation between Boston and KLG is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and WK Kellogg Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WK Kellogg 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 WK Kellogg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WK Kellogg has no effect on the direction of Boston Beer i.e., Boston Beer and WK Kellogg go up and down completely randomly.

Pair Corralation between Boston Beer and WK Kellogg

Considering the 90-day investment horizon Boston Beer is expected to generate 0.48 times more return on investment than WK Kellogg. However, Boston Beer is 2.06 times less risky than WK Kellogg. It trades about 0.17 of its potential returns per unit of risk. WK Kellogg Co is currently generating about 0.08 per unit of risk. If you would invest  26,934  in Boston Beer on September 13, 2024 and sell it today you would earn a total of  4,573  from holding Boston Beer or generate 16.98% return on investment over 90 days.

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

Boston Beer  vs.  WK Kellogg Co

Boston Beer

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Boston Beer displayed solid returns over the last few months and may actually be approaching a breakup point.

WK Kellogg

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WK Kellogg Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, WK Kellogg reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Beer and WK Kellogg

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

The idea behind Boston Beer and WK Kellogg 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.