Correlation Between Boston Beer and Topaz

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

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

Diversification Opportunities for Boston Beer and Topaz

0.82

Correlation Coefficient

Boston Beer  Topaz

Very poor diversification

The 3 months correlation between Boston and Topaz is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Topaz Solar Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topaz Solar Farms 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 Topaz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topaz Solar Farms has no effect on the direction of Boston Beer i.e., Boston Beer and Topaz go up and down completely randomly.

Pair Corralation between Boston Beer and Topaz

Considering the 90-day investment horizon Boston Beer is expected to under-perform the Topaz. In addition to that, Boston Beer is 4.43 times more volatile than Topaz Solar Farms. It trades about -0.06 of its total potential returns per unit of risk. Topaz Solar Farms is currently generating about -0.08 per unit of volatility. If you would invest  9,739  in Topaz Solar Farms on December 4, 2024 and sell it today you would lose (45.00) from holding Topaz Solar Farms or give up 0.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	71.43%
Values	Daily Returns

Boston Beer  vs.  Topaz Solar Farms

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.

Topaz Solar Farms

Risk-Adjusted Performance

Very Weak

Over the last 90 days Topaz Solar Farms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Topaz 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 Topaz

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

The idea behind Boston Beer and Topaz Solar Farms 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.