Correlation Between Crimson Wine and Winmark

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

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

Diversification Opportunities for Crimson Wine and Winmark

0.05

Correlation Coefficient

Crimson Wine  Winmark

Significant diversification

The 3 months correlation between Crimson and Winmark is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Crimson Wine and Winmark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winmark and Crimson Wine 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 Crimson Wine are associated (or correlated) with Winmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winmark has no effect on the direction of Crimson Wine i.e., Crimson Wine and Winmark go up and down completely randomly.

Pair Corralation between Crimson Wine and Winmark

Given the investment horizon of 90 days Crimson Wine is expected to under-perform the Winmark. But the otc stock apears to be less risky and, when comparing its historical volatility, Crimson Wine is 1.2 times less risky than Winmark. The otc stock trades about -0.03 of its potential returns per unit of risk. The Winmark is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  37,656  in Winmark on September 19, 2024 and sell it today you would earn a total of  3,162  from holding Winmark or generate 8.4% return on investment over 90 days.

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

Crimson Wine  vs.  Winmark

Crimson Wine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crimson Wine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Crimson Wine is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Winmark

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Winmark are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Winmark may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Crimson Wine and Winmark

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

The idea behind Crimson Wine and Winmark 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.