Correlation Between Boston Beer and Park Ohio

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

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

Diversification Opportunities for Boston Beer and Park Ohio

0.73

Correlation Coefficient

Boston Beer  Park Ohio

Poor diversification

The 3 months correlation between Boston and Park is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Park Ohio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Ohio Holdings 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 Park Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Ohio Holdings has no effect on the direction of Boston Beer i.e., Boston Beer and Park Ohio go up and down completely randomly.

Pair Corralation between Boston Beer and Park Ohio

Considering the 90-day investment horizon Boston Beer is expected to generate 17.18 times less return on investment than Park Ohio. But when comparing it to its historical volatility, Boston Beer is 1.24 times less risky than Park Ohio. It trades about 0.01 of its potential returns per unit of risk. Park Ohio Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,130  in Park Ohio Holdings on September 18, 2024 and sell it today you would earn a total of  1,821  from holding Park Ohio Holdings or generate 161.15% return on investment over 90 days.

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

Boston Beer  vs.  Park Ohio Holdings

Boston Beer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Boston Beer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Park Ohio Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Park Ohio Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Park Ohio is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Boston Beer and Park Ohio

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

The idea behind Boston Beer and Park Ohio Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.