Correlation Between Willamette Valley and Relx PLC

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

Diversification Opportunities for Willamette Valley and Relx PLC

0.37

Correlation Coefficient

Willamette Valley  Relx PLC

Weak diversification

The 3 months correlation between Willamette and Relx is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Relx PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relx PLC ADR 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 Relx PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relx PLC ADR has no effect on the direction of Willamette Valley i.e., Willamette Valley and Relx PLC go up and down completely randomly.

Pair Corralation between Willamette Valley and Relx PLC

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Relx PLC. In addition to that, Willamette Valley is 1.75 times more volatile than Relx PLC ADR. It trades about -0.06 of its total potential returns per unit of risk. Relx PLC ADR is currently generating about 0.11 per unit of volatility. If you would invest  2,684  in Relx PLC ADR on September 13, 2024 and sell it today you would earn a total of  2,061  from holding Relx PLC ADR or generate 76.79% return on investment over 90 days.

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

Willamette Valley Vineyards  vs.  Relx PLC ADR

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.

Relx PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Relx PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Relx PLC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Willamette Valley and Relx PLC

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

The idea behind Willamette Valley Vineyards and Relx PLC ADR 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..