Correlation Between Australian Oilseeds and Crimson Wine

Can any of the company-specific risk be diversified away by investing in both Australian Oilseeds and Crimson Wine 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 Australian Oilseeds and Crimson Wine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Australian Oilseeds Holdings and Crimson Wine, you can compare the effects of market volatilities on Australian Oilseeds and Crimson Wine 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 Australian Oilseeds with a short position of Crimson Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Oilseeds and Crimson Wine.

Diversification Opportunities for Australian Oilseeds and Crimson Wine

-0.74

Correlation Coefficient

Australian Oilseeds  Crimson Wine

Pay attention - limited upside

The 3 months correlation between Australian and Crimson is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Australian Oilseeds Holdings and Crimson Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crimson Wine and Australian Oilseeds 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 Australian Oilseeds Holdings are associated (or correlated) with Crimson Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crimson Wine has no effect on the direction of Australian Oilseeds i.e., Australian Oilseeds and Crimson Wine go up and down completely randomly.

Pair Corralation between Australian Oilseeds and Crimson Wine

Given the investment horizon of 90 days Australian Oilseeds Holdings is expected to generate 5.29 times more return on investment than Crimson Wine. However, Australian Oilseeds is 5.29 times more volatile than Crimson Wine. It trades about 0.13 of its potential returns per unit of risk. Crimson Wine is currently generating about -0.13 per unit of risk. If you would invest  99.00  in Australian Oilseeds Holdings on October 10, 2024 and sell it today you would earn a total of  16.00  from holding Australian Oilseeds Holdings or generate 16.16% return on investment over 90 days.

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

Australian Oilseeds Holdings  vs.  Crimson Wine

Australian Oilseeds

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Oilseeds Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Australian Oilseeds unveiled solid returns over the last few months and may actually be approaching a breakup point.

Crimson Wine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crimson Wine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Australian Oilseeds and Crimson Wine

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

The idea behind Australian Oilseeds Holdings and Crimson Wine 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .