Correlation Between Boston Beer and MACYS

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

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

Diversification Opportunities for Boston Beer and MACYS

0.04

Correlation Coefficient

Boston Beer  MACYS

Significant diversification

The 3 months correlation between Boston and MACYS is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and MACYS RETAIL HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACYS RETAIL HLDGS 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 MACYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACYS RETAIL HLDGS has no effect on the direction of Boston Beer i.e., Boston Beer and MACYS go up and down completely randomly.

Pair Corralation between Boston Beer and MACYS

Considering the 90-day investment horizon Boston Beer is expected to under-perform the MACYS. In addition to that, Boston Beer is 1.77 times more volatile than MACYS RETAIL HLDGS. It trades about -0.1 of its total potential returns per unit of risk. MACYS RETAIL HLDGS is currently generating about -0.18 per unit of volatility. If you would invest  7,013  in MACYS RETAIL HLDGS on September 27, 2024 and sell it today you would lose (188.00) from holding MACYS RETAIL HLDGS or give up 2.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.36%
Values	Daily Returns

Boston Beer  vs.  MACYS RETAIL HLDGS

Boston Beer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 5 (%) 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.

MACYS RETAIL HLDGS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MACYS RETAIL HLDGS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MACYS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boston Beer and MACYS

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

The idea behind Boston Beer and MACYS RETAIL HLDGS 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.