Correlation Between Turning Point and Anheuser Busch

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

By analyzing existing cross correlation between Turning Point Brands and Anheuser Busch Inbev, you can compare the effects of market volatilities on Turning Point and Anheuser Busch 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 Turning Point with a short position of Anheuser Busch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Turning Point and Anheuser Busch.

Diversification Opportunities for Turning Point and Anheuser Busch

0.7

Correlation Coefficient

Turning Point  Anheuser Busch

Poor diversification

The 3 months correlation between Turning and Anheuser is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Turning Point Brands and Anheuser Busch Inbev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch Inbev and Turning Point 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 Turning Point Brands are associated (or correlated) with Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch Inbev has no effect on the direction of Turning Point i.e., Turning Point and Anheuser Busch go up and down completely randomly.

Pair Corralation between Turning Point and Anheuser Busch

Considering the 90-day investment horizon Turning Point Brands is expected to generate 1.29 times more return on investment than Anheuser Busch. However, Turning Point is 1.29 times more volatile than Anheuser Busch Inbev. It trades about 0.11 of its potential returns per unit of risk. Anheuser Busch Inbev is currently generating about 0.11 per unit of risk. If you would invest  6,082  in Turning Point Brands on December 1, 2024 and sell it today you would earn a total of  818.00  from holding Turning Point Brands or generate 13.45% return on investment over 90 days.

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

Turning Point Brands  vs.  Anheuser Busch Inbev

Turning Point Brands

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Turning Point Brands are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Turning Point sustained solid returns over the last few months and may actually be approaching a breakup point.

Anheuser Busch Inbev

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anheuser Busch Inbev are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Anheuser Busch may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Turning Point and Anheuser Busch

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

The idea behind Turning Point Brands and Anheuser Busch Inbev 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.