Correlation Between Lowland Investment and Virgin Wines

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

By analyzing existing cross correlation between Lowland Investment Co and Virgin Wines UK, you can compare the effects of market volatilities on Lowland Investment and Virgin Wines 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 Lowland Investment with a short position of Virgin Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowland Investment and Virgin Wines.

Diversification Opportunities for Lowland Investment and Virgin Wines

0.41

Correlation Coefficient

Lowland Investment  Virgin Wines

Very weak diversification

The 3 months correlation between Lowland and Virgin is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Lowland Investment Co and Virgin Wines UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Wines UK and Lowland Investment 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 Lowland Investment Co are associated (or correlated) with Virgin Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Wines UK has no effect on the direction of Lowland Investment i.e., Lowland Investment and Virgin Wines go up and down completely randomly.

Pair Corralation between Lowland Investment and Virgin Wines

Assuming the 90 days trading horizon Lowland Investment Co is expected to generate 0.67 times more return on investment than Virgin Wines. However, Lowland Investment Co is 1.5 times less risky than Virgin Wines. It trades about -0.05 of its potential returns per unit of risk. Virgin Wines UK is currently generating about -0.28 per unit of risk. If you would invest  12,987  in Lowland Investment Co on September 20, 2024 and sell it today you would lose (437.00) from holding Lowland Investment Co or give up 3.36% of portfolio value over 90 days.

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

Lowland Investment Co  vs.  Virgin Wines UK

Lowland Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lowland Investment Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Lowland Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Virgin Wines UK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virgin Wines UK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lowland Investment and Virgin Wines

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

The idea behind Lowland Investment Co and Virgin Wines UK 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.