Correlation Between Papaya Growth and Boston Beer

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

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

Diversification Opportunities for Papaya Growth and Boston Beer

-0.07

Correlation Coefficient

Papaya Growth  Boston Beer

Good diversification

The 3 months correlation between Papaya and Boston is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Papaya Growth Opportunity and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Papaya Growth 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 Papaya Growth Opportunity 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 Papaya Growth i.e., Papaya Growth and Boston Beer go up and down completely randomly.

Pair Corralation between Papaya Growth and Boston Beer

Assuming the 90 days horizon Papaya Growth Opportunity is expected to under-perform the Boston Beer. But the stock apears to be less risky and, when comparing its historical volatility, Papaya Growth Opportunity is 1.58 times less risky than Boston Beer. The stock trades about -0.03 of its potential returns per unit of risk. The Boston Beer is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  30,190  in Boston Beer on September 29, 2024 and sell it today you would lose (79.00) from holding Boston Beer or give up 0.26% of portfolio value over 90 days.

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

Papaya Growth Opportunity  vs.  Boston Beer

Papaya Growth Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Papaya Growth Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Boston Beer

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Boston Beer is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Papaya Growth and Boston Beer

The main advantage of trading using opposite Papaya Growth and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Papaya Growth 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 Papaya Growth Opportunity and 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.