Correlation Between Boston Beer and WisdomTree Investments

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

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

Diversification Opportunities for Boston Beer and WisdomTree Investments

0.9

Correlation Coefficient

Boston Beer  WisdomTree Investments

Almost no diversification

The 3 months correlation between Boston and WisdomTree is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and WisdomTree Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Investments 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 The Boston Beer are associated (or correlated) with WisdomTree Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Investments has no effect on the direction of Boston Beer i.e., Boston Beer and WisdomTree Investments go up and down completely randomly.

Pair Corralation between Boston Beer and WisdomTree Investments

Assuming the 90 days trading horizon Boston Beer is expected to generate 11.28 times less return on investment than WisdomTree Investments. In addition to that, Boston Beer is 1.04 times more volatile than WisdomTree Investments. It trades about 0.01 of its total potential returns per unit of risk. WisdomTree Investments is currently generating about 0.08 per unit of volatility. If you would invest  501.00  in WisdomTree Investments on September 28, 2024 and sell it today you would earn a total of  514.00  from holding WisdomTree Investments or generate 102.59% return on investment over 90 days.

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

The Boston Beer  vs.  WisdomTree Investments

Boston Beer

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Boston Beer are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Boston Beer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WisdomTree Investments

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WisdomTree Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Beer and WisdomTree Investments

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

The idea behind The Boston Beer and WisdomTree Investments 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.