Correlation Between Boston Beer and Mastercard

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

Diversification Opportunities for Boston Beer and Mastercard

0.92

Correlation Coefficient

Boston Beer  Mastercard

Almost no diversification

The 3 months correlation between Boston and Mastercard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard 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 Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of Boston Beer i.e., Boston Beer and Mastercard go up and down completely randomly.

Pair Corralation between Boston Beer and Mastercard

Assuming the 90 days trading horizon The Boston Beer is expected to generate 1.46 times more return on investment than Mastercard. However, Boston Beer is 1.46 times more volatile than Mastercard. It trades about 0.17 of its potential returns per unit of risk. Mastercard is currently generating about 0.23 per unit of risk. If you would invest  25,220  in The Boston Beer on September 5, 2024 and sell it today you would earn a total of  4,460  from holding The Boston Beer or generate 17.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

The Boston Beer  vs.  Mastercard

Boston Beer

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boston Beer are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Boston Beer reported solid returns over the last few months and may actually be approaching a breakup point.

Mastercard

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, Mastercard unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Beer and Mastercard

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

The idea behind The Boston Beer and Mastercard 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.