Correlation Between Boston Beer and Union Pacific

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

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

Diversification Opportunities for Boston Beer and Union Pacific

-0.28

Correlation Coefficient

Boston Beer  Union Pacific

Very good diversification

The 3 months correlation between Boston and Union is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and Union Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific 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 The Boston Beer are associated (or correlated) with Union Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Pacific has no effect on the direction of Boston Beer i.e., Boston Beer and Union Pacific go up and down completely randomly.

Pair Corralation between Boston Beer and Union Pacific

Assuming the 90 days trading horizon The Boston Beer is expected to under-perform the Union Pacific. In addition to that, Boston Beer is 1.45 times more volatile than Union Pacific. It trades about -0.19 of its total potential returns per unit of risk. Union Pacific is currently generating about 0.05 per unit of volatility. If you would invest  18,795  in Union Pacific on April 24, 2025 and sell it today you would earn a total of  785.00  from holding Union Pacific or generate 4.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

The Boston Beer  vs.  Union Pacific

Boston Beer

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Union Pacific

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Union Pacific are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Union Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Boston Beer and Union Pacific

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

The idea behind The Boston Beer and Union Pacific 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.