Correlation Between Equifax and Boston Beer

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

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

Diversification Opportunities for Equifax and Boston Beer

-0.64

Correlation Coefficient

Equifax  Boston Beer

Excellent diversification

The 3 months correlation between Equifax and Boston is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Equifax and The Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Equifax 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 Equifax are associated (or correlated) with Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Equifax i.e., Equifax and Boston Beer go up and down completely randomly.

Pair Corralation between Equifax and Boston Beer

Assuming the 90 days horizon Equifax is expected to generate 7.87 times more return on investment than Boston Beer. However, Equifax is 7.87 times more volatile than The Boston Beer. It trades about 0.05 of its potential returns per unit of risk. The Boston Beer is currently generating about 0.01 per unit of risk. If you would invest  3,952  in Equifax on September 30, 2024 and sell it today you would earn a total of  20,648  from holding Equifax or generate 522.47% return on investment over 90 days.

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

Equifax  vs.  The Boston Beer

Equifax

Risk-Adjusted Performance

0 of 100

Very Weak

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

Boston Beer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Boston Beer are ranked lower than 9 (%) 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.

Pair Trading with Equifax and Boston Beer

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

The idea behind Equifax and The Boston Beer 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.