Correlation Between Boston Beer and Reservoir Media

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

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

Diversification Opportunities for Boston Beer and Reservoir Media

0.68

Correlation Coefficient

Boston Beer  Reservoir Media

Poor diversification

The 3 months correlation between Boston and Reservoir is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media 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 Reservoir Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reservoir Media has no effect on the direction of Boston Beer i.e., Boston Beer and Reservoir Media go up and down completely randomly.

Pair Corralation between Boston Beer and Reservoir Media

Considering the 90-day investment horizon Boston Beer is expected to under-perform the Reservoir Media. In addition to that, Boston Beer is 1.06 times more volatile than Reservoir Media. It trades about -0.01 of its total potential returns per unit of risk. Reservoir Media is currently generating about 0.02 per unit of volatility. If you would invest  694.00  in Reservoir Media on October 11, 2024 and sell it today you would earn a total of  114.00  from holding Reservoir Media or generate 16.43% 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.  Reservoir Media

Boston Beer

Risk-Adjusted Performance

1 of 100

Very 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.

Reservoir Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reservoir Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Reservoir Media is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Boston Beer and Reservoir Media

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

The idea behind Boston Beer and Reservoir Media 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.