Correlation Between Treasury Wine and Crimson Wine

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

Diversification Opportunities for Treasury Wine and Crimson Wine

-0.01

Correlation Coefficient

Treasury Wine  Crimson Wine

Good diversification

The 3 months correlation between Treasury and Crimson is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Crimson Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crimson Wine 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 Crimson Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crimson Wine has no effect on the direction of Treasury Wine i.e., Treasury Wine and Crimson Wine go up and down completely randomly.

Pair Corralation between Treasury Wine and Crimson Wine

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the Crimson Wine. In addition to that, Treasury Wine is 1.12 times more volatile than Crimson Wine. It trades about 0.0 of its total potential returns per unit of risk. Crimson Wine is currently generating about 0.04 per unit of volatility. If you would invest  630.00  in Crimson Wine on September 18, 2024 and sell it today you would earn a total of  20.00  from holding Crimson Wine or generate 3.17% return on investment over 90 days.

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

Treasury Wine Estates  vs.  Crimson Wine

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. 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.

Crimson Wine

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crimson Wine are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Crimson Wine is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Treasury Wine and Crimson Wine

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

The idea behind Treasury Wine Estates and Crimson Wine 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.