Correlation Between Boston Beer and Nexstar Broadcasting

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

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

Diversification Opportunities for Boston Beer and Nexstar Broadcasting

0.47

Correlation Coefficient

Boston Beer  Nexstar Broadcasting

Very weak diversification

The 3 months correlation between Boston and Nexstar is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Nexstar Broadcasting Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstar Broadcasting 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 Nexstar Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstar Broadcasting has no effect on the direction of Boston Beer i.e., Boston Beer and Nexstar Broadcasting go up and down completely randomly.

Pair Corralation between Boston Beer and Nexstar Broadcasting

Considering the 90-day investment horizon Boston Beer is expected to generate 0.91 times more return on investment than Nexstar Broadcasting. However, Boston Beer is 1.09 times less risky than Nexstar Broadcasting. It trades about 0.07 of its potential returns per unit of risk. Nexstar Broadcasting Group is currently generating about -0.11 per unit of risk. If you would invest  31,327  in Boston Beer on September 12, 2024 and sell it today you would earn a total of  569.00  from holding Boston Beer or generate 1.82% return on investment over 90 days.

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

Boston Beer  vs.  Nexstar Broadcasting Group

Boston Beer

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 14 (%) 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.

Nexstar Broadcasting

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nexstar Broadcasting Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Nexstar Broadcasting is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Boston Beer and Nexstar Broadcasting

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

The idea behind Boston Beer and Nexstar Broadcasting Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.