Correlation Between Treasury Wine and SNDL

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

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

Diversification Opportunities for Treasury Wine and SNDL

0.23

Correlation Coefficient

Treasury Wine  SNDL

Modest diversification

The 3 months correlation between Treasury and SNDL is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc and Treasury 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 Treasury Wine Estates are associated (or correlated) with SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Treasury Wine i.e., Treasury Wine and SNDL go up and down completely randomly.

Pair Corralation between Treasury Wine and SNDL

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the SNDL. But the pink sheet apears to be less risky and, when comparing its historical volatility, Treasury Wine Estates is 1.31 times less risky than SNDL. The pink sheet trades about -0.02 of its potential returns per unit of risk. The SNDL Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  200.00  in SNDL Inc on September 5, 2024 and sell it today you would lose (9.00) from holding SNDL Inc or give up 4.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Treasury Wine Estates  vs.  SNDL Inc

Treasury Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Treasury Wine is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SNDL Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Treasury Wine and SNDL

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

The idea behind Treasury Wine Estates and SNDL Inc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.