Correlation Between Boston Beer and PEPSICO

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

By analyzing existing cross correlation between Boston Beer and PEPSICO INC 425, you can compare the effects of market volatilities on Boston Beer and PEPSICO 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 PEPSICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and PEPSICO.

Diversification Opportunities for Boston Beer and PEPSICO

0.04

Correlation Coefficient

Boston Beer  PEPSICO

Significant diversification

The 3 months correlation between Boston and PEPSICO is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and PEPSICO INC 425 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC 425 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 PEPSICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEPSICO INC 425 has no effect on the direction of Boston Beer i.e., Boston Beer and PEPSICO go up and down completely randomly.

Pair Corralation between Boston Beer and PEPSICO

Considering the 90-day investment horizon Boston Beer is expected to generate 0.67 times more return on investment than PEPSICO. However, Boston Beer is 1.5 times less risky than PEPSICO. It trades about 0.1 of its potential returns per unit of risk. PEPSICO INC 425 is currently generating about 0.02 per unit of risk. If you would invest  27,638  in Boston Beer on September 24, 2024 and sell it today you would earn a total of  2,639  from holding Boston Beer or generate 9.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	55.38%
Values	Daily Returns

Boston Beer  vs.  PEPSICO INC 425

Boston Beer

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 7 (%) 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.

PEPSICO INC 425

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PEPSICO INC 425 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, PEPSICO 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 PEPSICO

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

The idea behind Boston Beer and PEPSICO INC 425 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.