Correlation Between BOSTON BEER and Aurubis AG

Can any of the company-specific risk be diversified away by investing in both BOSTON BEER and Aurubis AG 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 Aurubis AG 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 Aurubis AG, you can compare the effects of market volatilities on BOSTON BEER and Aurubis AG 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 Aurubis AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and Aurubis AG.

Diversification Opportunities for BOSTON BEER and Aurubis AG

0.88

Correlation Coefficient

BOSTON BEER  Aurubis AG

Very poor diversification

The 3 months correlation between BOSTON and Aurubis is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Aurubis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurubis AG 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 Aurubis AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurubis AG has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and Aurubis AG go up and down completely randomly.

Pair Corralation between BOSTON BEER and Aurubis AG

Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the Aurubis AG. But the stock apears to be less risky and, when comparing its historical volatility, BOSTON BEER A is 1.7 times less risky than Aurubis AG. The stock trades about -0.08 of its potential returns per unit of risk. The Aurubis AG is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,515  in Aurubis AG on September 29, 2024 and sell it today you would earn a total of  155.00  from holding Aurubis AG or generate 2.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

BOSTON BEER A   vs.  Aurubis AG

BOSTON BEER A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BOSTON BEER A are ranked lower than 9 (%) 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.

Aurubis AG

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with BOSTON BEER and Aurubis AG

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

The idea behind BOSTON BEER A and Aurubis AG 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.