Correlation Between Crimson Wine and Fresh Grapes

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

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

Diversification Opportunities for Crimson Wine and Fresh Grapes

0.26

Correlation Coefficient

Crimson Wine  Fresh Grapes

Modest diversification

The 3 months correlation between Crimson and Fresh is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Crimson Wine and Fresh Grapes LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresh Grapes LLC and Crimson Wine 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 Crimson Wine are associated (or correlated) with Fresh Grapes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresh Grapes LLC has no effect on the direction of Crimson Wine i.e., Crimson Wine and Fresh Grapes go up and down completely randomly.

Pair Corralation between Crimson Wine and Fresh Grapes

Given the investment horizon of 90 days Crimson Wine is expected to generate 7.62 times less return on investment than Fresh Grapes. But when comparing it to its historical volatility, Crimson Wine is 4.56 times less risky than Fresh Grapes. It trades about 0.04 of its potential returns per unit of risk. Fresh Grapes LLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  46.00  in Fresh Grapes LLC on September 23, 2024 and sell it today you would earn a total of  17.00  from holding Fresh Grapes LLC or generate 36.96% return on investment over 90 days.

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

Crimson Wine  vs.  Fresh Grapes LLC

Crimson Wine

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crimson Wine are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Crimson Wine is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Fresh Grapes LLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Grapes LLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Fresh Grapes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crimson Wine and Fresh Grapes

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

The idea behind Crimson Wine and Fresh Grapes LLC 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.