Correlation Between Boston Beer and Banpu PCL

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

Diversification Opportunities for Boston Beer and Banpu PCL

-0.87

Correlation Coefficient

Boston Beer  Banpu PCL

Pay attention - limited upside

The 3 months correlation between Boston and Banpu is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and Banpu PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banpu PCL 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 Banpu PCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banpu PCL has no effect on the direction of Boston Beer i.e., Boston Beer and Banpu PCL go up and down completely randomly.

Pair Corralation between Boston Beer and Banpu PCL

Assuming the 90 days trading horizon The Boston Beer is expected to generate 0.32 times more return on investment than Banpu PCL. However, The Boston Beer is 3.15 times less risky than Banpu PCL. It trades about 0.17 of its potential returns per unit of risk. Banpu PCL is currently generating about -0.05 per unit of risk. If you would invest  24,520  in The Boston Beer on September 23, 2024 and sell it today you would earn a total of  4,400  from holding The Boston Beer or generate 17.94% return on investment over 90 days.

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

The Boston Beer  vs.  Banpu PCL

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 fragile technical and fundamental indicators, Boston Beer reported solid returns over the last few months and may actually be approaching a breakup point.

Banpu PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banpu PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Boston Beer and Banpu PCL

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

The idea behind The Boston Beer and Banpu PCL 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.