Correlation Between Boston Beer and Titan Machinery

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

Diversification Opportunities for Boston Beer and Titan Machinery

0.81

Correlation Coefficient

Boston Beer  Titan Machinery

Very poor diversification

The 3 months correlation between Boston and Titan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery 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 Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of Boston Beer i.e., Boston Beer and Titan Machinery go up and down completely randomly.

Pair Corralation between Boston Beer and Titan Machinery

Assuming the 90 days trading horizon The Boston Beer is expected to generate 0.54 times more return on investment than Titan Machinery. However, The Boston Beer is 1.86 times less risky than Titan Machinery. It trades about 0.1 of its potential returns per unit of risk. Titan Machinery is currently generating about 0.01 per unit of risk. If you would invest  25,840  in The Boston Beer on September 29, 2024 and sell it today you would earn a total of  2,460  from holding The Boston Beer or generate 9.52% return on investment over 90 days.

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

The Boston Beer  vs.  Titan Machinery

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 uncertain technical and fundamental indicators, Boston Beer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Titan Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Titan Machinery is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Boston Beer and Titan Machinery

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

The idea behind The Boston Beer and Titan Machinery 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.