Correlation Between Boston Beer and Westrock Coffee

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

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

Diversification Opportunities for Boston Beer and Westrock Coffee

0.13

Correlation Coefficient

Boston Beer  Westrock Coffee

Average diversification

The 3 months correlation between Boston and Westrock is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee 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 Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of Boston Beer i.e., Boston Beer and Westrock Coffee go up and down completely randomly.

Pair Corralation between Boston Beer and Westrock Coffee

Considering the 90-day investment horizon Boston Beer is expected to generate 0.43 times more return on investment than Westrock Coffee. However, Boston Beer is 2.31 times less risky than Westrock Coffee. It trades about 0.13 of its potential returns per unit of risk. Westrock Coffee is currently generating about 0.03 per unit of risk. If you would invest  28,007  in Boston Beer on September 2, 2024 and sell it today you would earn a total of  3,617  from holding Boston Beer or generate 12.91% return on investment over 90 days.

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

Boston Beer  vs.  Westrock Coffee

Boston Beer

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Boston Beer displayed solid returns over the last few months and may actually be approaching a breakup point.

Westrock Coffee

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Westrock Coffee are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Westrock Coffee may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Boston Beer and Westrock Coffee

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

The idea behind Boston Beer and Westrock Coffee 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.