Correlation Between Boston Beer and WarpSpeed Taxi

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

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

Diversification Opportunities for Boston Beer and WarpSpeed Taxi

0.3

Correlation Coefficient

Boston Beer  WarpSpeed Taxi

Weak diversification

The 3 months correlation between Boston and WarpSpeed is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and WarpSpeed Taxi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WarpSpeed Taxi 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 WarpSpeed Taxi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WarpSpeed Taxi has no effect on the direction of Boston Beer i.e., Boston Beer and WarpSpeed Taxi go up and down completely randomly.

Pair Corralation between Boston Beer and WarpSpeed Taxi

Considering the 90-day investment horizon Boston Beer is expected to generate 12.01 times less return on investment than WarpSpeed Taxi. But when comparing it to its historical volatility, Boston Beer is 19.83 times less risky than WarpSpeed Taxi. It trades about 0.16 of its potential returns per unit of risk. WarpSpeed Taxi is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7.00  in WarpSpeed Taxi on September 15, 2024 and sell it today you would lose (0.40) from holding WarpSpeed Taxi or give up 5.71% of portfolio value over 90 days.

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

Boston Beer  vs.  WarpSpeed Taxi

Boston Beer

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Boston Beer displayed solid returns over the last few months and may actually be approaching a breakup point.

WarpSpeed Taxi

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WarpSpeed Taxi are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, WarpSpeed Taxi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Beer and WarpSpeed Taxi

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

The idea behind Boston Beer and WarpSpeed Taxi 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.