Correlation Between Boston Beer and Liberty Northwest

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

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

Diversification Opportunities for Boston Beer and Liberty Northwest

0.22

Correlation Coefficient

Boston Beer  Liberty Northwest

Modest diversification

The 3 months correlation between Boston and Liberty is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Liberty Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Northwest Bancorp 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 Liberty Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Northwest Bancorp has no effect on the direction of Boston Beer i.e., Boston Beer and Liberty Northwest go up and down completely randomly.

Pair Corralation between Boston Beer and Liberty Northwest

Considering the 90-day investment horizon Boston Beer is expected to under-perform the Liberty Northwest. In addition to that, Boston Beer is 1.17 times more volatile than Liberty Northwest Bancorp. It trades about -0.16 of its total potential returns per unit of risk. Liberty Northwest Bancorp is currently generating about -0.02 per unit of volatility. If you would invest  535.00  in Liberty Northwest Bancorp on October 25, 2024 and sell it today you would lose (15.00) from holding Liberty Northwest Bancorp or give up 2.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Boston Beer  vs.  Liberty Northwest Bancorp

Boston Beer

Risk-Adjusted Performance

0 of 100

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Liberty Northwest Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Northwest Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Liberty Northwest is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Boston Beer and Liberty Northwest

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

The idea behind Boston Beer and Liberty Northwest Bancorp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.