Correlation Between Boston Beer and BIOGEN

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

By analyzing existing cross correlation between Boston Beer and BIOGEN INC 405, you can compare the effects of market volatilities on Boston Beer and BIOGEN 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 BIOGEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and BIOGEN.

Diversification Opportunities for Boston Beer and BIOGEN

-0.36

Correlation Coefficient

Boston Beer  BIOGEN

Very good diversification

The 3 months correlation between Boston and BIOGEN is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and BIOGEN INC 405 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIOGEN INC 405 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 BIOGEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIOGEN INC 405 has no effect on the direction of Boston Beer i.e., Boston Beer and BIOGEN go up and down completely randomly.

Pair Corralation between Boston Beer and BIOGEN

Considering the 90-day investment horizon Boston Beer is expected to generate 6.12 times more return on investment than BIOGEN. However, Boston Beer is 6.12 times more volatile than BIOGEN INC 405. It trades about 0.17 of its potential returns per unit of risk. BIOGEN INC 405 is currently generating about -0.07 per unit of risk. If you would invest  27,187  in Boston Beer on September 14, 2024 and sell it today you would earn a total of  4,723  from holding Boston Beer or generate 17.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Boston Beer  vs.  BIOGEN INC 405

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 weak basic indicators, Boston Beer displayed solid returns over the last few months and may actually be approaching a breakup point.

BIOGEN INC 405

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BIOGEN INC 405 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BIOGEN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boston Beer and BIOGEN

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

The idea behind Boston Beer and BIOGEN INC 405 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 Transaction History module to view history of all your transactions and understand their impact on performance.