Correlation Between Willamette Valley and Origin Materials

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

Diversification Opportunities for Willamette Valley and Origin Materials

0.61

Correlation Coefficient

Willamette Valley  Origin Materials

Poor diversification

The 3 months correlation between Willamette and Origin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Origin Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Materials 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 Origin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Materials has no effect on the direction of Willamette Valley i.e., Willamette Valley and Origin Materials go up and down completely randomly.

Pair Corralation between Willamette Valley and Origin Materials

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Origin Materials. But the stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 2.45 times less risky than Origin Materials. The stock trades about -0.08 of its potential returns per unit of risk. The Origin Materials is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  136.00  in Origin Materials on September 5, 2024 and sell it today you would lose (11.00) from holding Origin Materials or give up 8.09% of portfolio value over 90 days.

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

Willamette Valley Vineyards  vs.  Origin Materials

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.

Origin Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Origin Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Origin Materials is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Willamette Valley and Origin Materials

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

The idea behind Willamette Valley Vineyards and Origin Materials 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.