Correlation Between Willamette Valley and Boston Beer

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

By analyzing existing cross correlation between Willamette Valley Vineyards and Boston Beer, you can compare the effects of market volatilities on Willamette Valley and Boston Beer 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 Willamette Valley with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and Boston Beer.

Diversification Opportunities for Willamette Valley and Boston Beer

-0.81

Correlation Coefficient

Willamette Valley  Boston Beer

Pay attention - limited upside

The 3 months correlation between Willamette and Boston is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Willamette Valley 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 Willamette Valley Vineyards are associated (or correlated) with Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Willamette Valley i.e., Willamette Valley and Boston Beer go up and down completely randomly.

Pair Corralation between Willamette Valley and Boston Beer

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Boston Beer. In addition to that, Willamette Valley is 1.11 times more volatile than Boston Beer. It trades about -0.08 of its total potential returns per unit of risk. Boston Beer is currently generating about 0.11 per unit of volatility. If you would invest  28,153  in Boston Beer on September 5, 2024 and sell it today you would earn a total of  3,149  from holding Boston Beer or generate 11.19% return on investment over 90 days.

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

Willamette Valley Vineyards  vs.  Boston Beer

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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.

Pair Trading with Willamette Valley and Boston Beer

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

The idea behind Willamette Valley Vineyards and Boston Beer 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.