Correlation Between Boston Beer and Montauk Renewables

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

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

Diversification Opportunities for Boston Beer and Montauk Renewables

-0.49

Correlation Coefficient

Boston Beer  Montauk Renewables

Very good diversification

The 3 months correlation between Boston and Montauk is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables 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 Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of Boston Beer i.e., Boston Beer and Montauk Renewables go up and down completely randomly.

Pair Corralation between Boston Beer and Montauk Renewables

Considering the 90-day investment horizon Boston Beer is expected to generate 0.38 times more return on investment than Montauk Renewables. However, Boston Beer is 2.65 times less risky than Montauk Renewables. It trades about 0.14 of its potential returns per unit of risk. Montauk Renewables is currently generating about -0.04 per unit of risk. If you would invest  27,637  in Boston Beer on September 17, 2024 and sell it today you would earn a total of  3,864  from holding Boston Beer or generate 13.98% return on investment over 90 days.

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

Boston Beer  vs.  Montauk Renewables

Boston Beer

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Boston Beer displayed solid returns over the last few months and may actually be approaching a breakup point.

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Boston Beer and Montauk Renewables

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

The idea behind Boston Beer and Montauk Renewables 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.