Correlation Between Boston Beer and Nabors Industries

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

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

Diversification Opportunities for Boston Beer and Nabors Industries

-0.07

Correlation Coefficient

Boston Beer  Nabors Industries

Good diversification

The 3 months correlation between Boston and Nabors is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries 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 Nabors Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Industries has no effect on the direction of Boston Beer i.e., Boston Beer and Nabors Industries go up and down completely randomly.

Pair Corralation between Boston Beer and Nabors Industries

Considering the 90-day investment horizon Boston Beer is expected to generate 0.61 times more return on investment than Nabors Industries. However, Boston Beer is 1.65 times less risky than Nabors Industries. It trades about -0.12 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.82 per unit of risk. If you would invest  31,280  in Boston Beer on September 23, 2024 and sell it today you would lose (1,003) from holding Boston Beer or give up 3.21% of portfolio value over 90 days.

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

Boston Beer  vs.  Nabors Industries

Boston Beer

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Boston Beer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nabors Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nabors Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Boston Beer and Nabors Industries

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

The idea behind Boston Beer and Nabors Industries 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.