Correlation Between Boston Beer and Stepan

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

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

Diversification Opportunities for Boston Beer and Stepan

0.76

Correlation Coefficient

Boston Beer  Stepan

Poor diversification

The 3 months correlation between Boston and Stepan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Boston Beer i.e., Boston Beer and Stepan go up and down completely randomly.

Pair Corralation between Boston Beer and Stepan

Considering the 90-day investment horizon Boston Beer is expected to under-perform the Stepan. In addition to that, Boston Beer is 1.07 times more volatile than Stepan Company. It trades about -0.2 of its total potential returns per unit of risk. Stepan Company is currently generating about -0.11 per unit of volatility. If you would invest  6,666  in Stepan Company on December 25, 2024 and sell it today you would lose (839.00) from holding Stepan Company or give up 12.59% of portfolio value over 90 days.

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

Boston Beer  vs.  Stepan Company

Boston Beer

Risk-Adjusted Performance

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

Stepan Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Boston Beer and Stepan

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

The idea behind Boston Beer and Stepan Company 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.