Correlation Between ITALIAN WINE and CDL INVESTMENT

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

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

Diversification Opportunities for ITALIAN WINE and CDL INVESTMENT

0.09

Correlation Coefficient

ITALIAN WINE  CDL INVESTMENT

Significant diversification

The 3 months correlation between ITALIAN and CDL is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and CDL INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDL INVESTMENT and ITALIAN 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 ITALIAN WINE BRANDS are associated (or correlated) with CDL INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDL INVESTMENT has no effect on the direction of ITALIAN WINE i.e., ITALIAN WINE and CDL INVESTMENT go up and down completely randomly.

Pair Corralation between ITALIAN WINE and CDL INVESTMENT

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to generate 1.31 times more return on investment than CDL INVESTMENT. However, ITALIAN WINE is 1.31 times more volatile than CDL INVESTMENT. It trades about 0.05 of its potential returns per unit of risk. CDL INVESTMENT is currently generating about -0.01 per unit of risk. If you would invest  2,080  in ITALIAN WINE BRANDS on September 25, 2024 and sell it today you would earn a total of  150.00  from holding ITALIAN WINE BRANDS or generate 7.21% return on investment over 90 days.

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

ITALIAN WINE BRANDS  vs.  CDL INVESTMENT

ITALIAN WINE BRANDS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ITALIAN WINE BRANDS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ITALIAN WINE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CDL INVESTMENT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ITALIAN WINE and CDL INVESTMENT

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

The idea behind ITALIAN WINE BRANDS and CDL INVESTMENT 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.