Correlation Between BOSTON BEER and DATANG INTL

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

By analyzing existing cross correlation between BOSTON BEER A and DATANG INTL POW, you can compare the effects of market volatilities on BOSTON BEER and DATANG INTL 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 DATANG INTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and DATANG INTL.

Diversification Opportunities for BOSTON BEER and DATANG INTL

-0.28

Correlation Coefficient

BOSTON BEER  DATANG INTL

Very good diversification

The 3 months correlation between BOSTON and DATANG is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and DATANG INTL POW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATANG INTL POW 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 A are associated (or correlated) with DATANG INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATANG INTL POW has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and DATANG INTL go up and down completely randomly.

Pair Corralation between BOSTON BEER and DATANG INTL

Assuming the 90 days trading horizon BOSTON BEER A is expected to generate 0.45 times more return on investment than DATANG INTL. However, BOSTON BEER A is 2.22 times less risky than DATANG INTL. It trades about 0.13 of its potential returns per unit of risk. DATANG INTL POW is currently generating about -0.01 per unit of risk. If you would invest  25,280  in BOSTON BEER A on September 28, 2024 and sell it today you would earn a total of  3,480  from holding BOSTON BEER A or generate 13.77% return on investment over 90 days.

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

BOSTON BEER A   vs.  DATANG INTL POW

BOSTON BEER A

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, BOSTON BEER exhibited solid returns over the last few months and may actually be approaching a breakup point.

DATANG INTL POW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DATANG INTL POW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DATANG INTL is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BOSTON BEER and DATANG INTL

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

The idea behind BOSTON BEER A and DATANG INTL POW 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.