Correlation Between Boston Beer and Anheuser Busch

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

By analyzing existing cross correlation between Boston Beer and Anheuser Busch InBev SANV, you can compare the effects of market volatilities on Boston Beer and Anheuser Busch 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 Anheuser Busch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Anheuser Busch.

Diversification Opportunities for Boston Beer and Anheuser Busch

-0.83

Correlation Coefficient

Boston Beer  Anheuser Busch

Pay attention - limited upside

The 3 months correlation between Boston and Anheuser is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Anheuser Busch InBev SANV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch InBev 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 Boston Beer are associated (or correlated) with Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch InBev has no effect on the direction of Boston Beer i.e., Boston Beer and Anheuser Busch go up and down completely randomly.

Pair Corralation between Boston Beer and Anheuser Busch

Considering the 90-day investment horizon Boston Beer is expected to generate 1.51 times more return on investment than Anheuser Busch. However, Boston Beer is 1.51 times more volatile than Anheuser Busch InBev SANV. It trades about 0.02 of its potential returns per unit of risk. Anheuser Busch InBev SANV is currently generating about -0.01 per unit of risk. If you would invest  30,129  in Boston Beer on September 12, 2024 and sell it today you would earn a total of  1,521  from holding Boston Beer or generate 5.05% return on investment over 90 days.

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

Boston Beer  vs.  Anheuser Busch InBev SANV

Boston Beer

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Boston Beer displayed solid returns over the last few months and may actually be approaching a breakup point.

Anheuser Busch InBev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch InBev SANV 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 technical and fundamental 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 Anheuser Busch

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

The idea behind Boston Beer and Anheuser Busch InBev SANV 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.