Correlation Between Treasury Wine and Carawine Resources

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

Diversification Opportunities for Treasury Wine and Carawine Resources

-0.31

Correlation Coefficient

Treasury Wine  Carawine Resources

Very good diversification

The 3 months correlation between Treasury and Carawine is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Carawine Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carawine Resources 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 Carawine Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carawine Resources has no effect on the direction of Treasury Wine i.e., Treasury Wine and Carawine Resources go up and down completely randomly.

Pair Corralation between Treasury Wine and Carawine Resources

Assuming the 90 days trading horizon Treasury Wine is expected to generate 27.32 times less return on investment than Carawine Resources. But when comparing it to its historical volatility, Treasury Wine Estates is 1.85 times less risky than Carawine Resources. It trades about 0.01 of its potential returns per unit of risk. Carawine Resources Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9.10  in Carawine Resources Limited on September 2, 2024 and sell it today you would earn a total of  1.90  from holding Carawine Resources Limited or generate 20.88% 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.  Carawine Resources Limited

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 comparatively stable technical and fundamental indicators, Treasury Wine is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Carawine Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carawine Resources Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Carawine Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treasury Wine and Carawine Resources

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

The idea behind Treasury Wine Estates and Carawine Resources Limited 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.