Correlation Between Willamette Valley and Vita Coco

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

By analyzing existing cross correlation between Willamette Valley Vineyards and Vita Coco, you can compare the effects of market volatilities on Willamette Valley and Vita Coco 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 Willamette Valley with a short position of Vita Coco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and Vita Coco.

Diversification Opportunities for Willamette Valley and Vita Coco

-0.85

Correlation Coefficient

Willamette Valley  Vita Coco

Pay attention - limited upside

The 3 months correlation between Willamette and Vita is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco and Willamette Valley 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 Willamette Valley Vineyards are associated (or correlated) with Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of Willamette Valley i.e., Willamette Valley and Vita Coco go up and down completely randomly.

Pair Corralation between Willamette Valley and Vita Coco

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Vita Coco. But the stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 1.25 times less risky than Vita Coco. The stock trades about -0.09 of its potential returns per unit of risk. The Vita Coco is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,488  in Vita Coco on September 2, 2024 and sell it today you would earn a total of  1,066  from holding Vita Coco or generate 42.85% return on investment over 90 days.

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

Willamette Valley Vineyards  vs.  Vita Coco

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Vita Coco

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Willamette Valley and Vita Coco

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

The idea behind Willamette Valley Vineyards and Vita Coco 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .