Correlation Between Willamette Valley and China Health

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

Diversification Opportunities for Willamette Valley and China Health

0.05

Correlation Coefficient

Willamette Valley  China Health

Significant diversification

The 3 months correlation between Willamette and China is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and China Health Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Industries 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 China Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Industries has no effect on the direction of Willamette Valley i.e., Willamette Valley and China Health go up and down completely randomly.

Pair Corralation between Willamette Valley and China Health

Assuming the 90 days horizon Willamette Valley Vineyards is expected to generate 0.52 times more return on investment than China Health. However, Willamette Valley Vineyards is 1.94 times less risky than China Health. It trades about 0.0 of its potential returns per unit of risk. China Health Industries is currently generating about -0.13 per unit of risk. If you would invest  372.00  in Willamette Valley Vineyards on September 22, 2024 and sell it today you would lose (22.00) from holding Willamette Valley Vineyards or give up 5.91% of portfolio value over 90 days.

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

Willamette Valley Vineyards  vs.  China Health Industries

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. Even with relatively invariable forward indicators, Willamette Valley is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

China Health Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Health Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Willamette Valley and China Health

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

The idea behind Willamette Valley Vineyards and China Health Industries 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.