Correlation Between Zumiez and Boston Beer

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

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

Diversification Opportunities for Zumiez and Boston Beer

-0.09

Correlation Coefficient

Zumiez  Boston Beer

Good diversification

The 3 months correlation between Zumiez and Boston is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Zumiez Inc and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Zumiez 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 Zumiez Inc are associated (or correlated) with Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Zumiez i.e., Zumiez and Boston Beer go up and down completely randomly.

Pair Corralation between Zumiez and Boston Beer

Given the investment horizon of 90 days Zumiez Inc is expected to generate 1.32 times more return on investment than Boston Beer. However, Zumiez is 1.32 times more volatile than Boston Beer. It trades about 0.01 of its potential returns per unit of risk. Boston Beer is currently generating about 0.01 per unit of risk. If you would invest  2,201  in Zumiez Inc on September 24, 2024 and sell it today you would lose (293.00) from holding Zumiez Inc or give up 13.31% of portfolio value over 90 days.

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

Zumiez Inc  vs.  Boston Beer

Zumiez Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zumiez Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Zumiez and Boston Beer

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

The idea behind Zumiez Inc and Boston Beer 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.