Correlation Between Willamette Valley and Treasury Wine

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Can any of the company-specific risk be diversified away by investing in both Willamette Valley and Treasury Wine 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 Treasury Wine 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 Treasury Wine Estates, you can compare the effects of market volatilities on Willamette Valley and Treasury Wine 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 Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and Treasury Wine.

Diversification Opportunities for Willamette Valley and Treasury Wine

0.34
  Correlation Coefficient

Weak diversification

The 24 months correlation between Willamette and Treasury is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates 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 Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of Willamette Valley i.e., Willamette Valley and Treasury Wine go up and down completely randomly.

Pair Corralation between Willamette Valley and Treasury Wine

Given the investment horizon of 90 days Willamette Valley is expected to generate 7.1 times less return on investment than Treasury Wine. In addition to that, Willamette Valley is 1.24 times more volatile than Treasury Wine Estates. It trades about 0.01 of its total potential returns per unit of risk. Treasury Wine Estates is currently generating about 0.04 per unit of volatility. If you would invest  674.00  in Treasury Wine Estates on September 5, 2022 and sell it today you would earn a total of  280.00  from holding Treasury Wine Estates or generate 41.54% return on investment over 90 days.
Time Period24 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Willamette Valley Vineyards  vs.  Treasury Wine Estates

 Performance (%) 
       Timeline  
Willamette Valley 
Willamette Performance
0 of 100
Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Willamette Valley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Willamette Price Channel

Treasury Wine Estates 
Treasury Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Treasury Wine Estates are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Treasury Wine is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Treasury Price Channel

Willamette Valley and Treasury Wine Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Willamette Valley and Treasury Wine

The main advantage of trading using opposite Willamette Valley and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley position performs unexpectedly, Treasury Wine 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 Treasury Wine will offset losses from the drop in Treasury Wine's long position.
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The idea behind Willamette Valley Vineyards and Treasury Wine Estates 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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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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