Correlation Between Boston Beer and JM Smucker

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

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

Diversification Opportunities for Boston Beer and JM Smucker

0.76

Correlation Coefficient

Boston Beer  JM Smucker

Poor diversification

The 3 months correlation between Boston and SJM is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and JM Smucker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Smucker 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 JM Smucker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Smucker has no effect on the direction of Boston Beer i.e., Boston Beer and JM Smucker go up and down completely randomly.

Pair Corralation between Boston Beer and JM Smucker

Considering the 90-day investment horizon Boston Beer is expected to under-perform the JM Smucker. But the stock apears to be less risky and, when comparing its historical volatility, Boston Beer is 1.09 times less risky than JM Smucker. The stock trades about -0.18 of its potential returns per unit of risk. The JM Smucker is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  11,952  in JM Smucker on February 3, 2024 and sell it today you would lose (667.00) from holding JM Smucker or give up 5.58% of portfolio value over 90 days.

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

Boston Beer  vs.  JM Smucker

Boston Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

JM Smucker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JM Smucker has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward-looking indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Boston Beer and JM Smucker

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

The idea behind Boston Beer and JM Smucker 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.