Correlation Between Diamond Estates and PacifiCorp

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

By analyzing existing cross correlation between Diamond Estates Wines and PacifiCorp, you can compare the effects of market volatilities on Diamond Estates and PacifiCorp 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 Diamond Estates with a short position of PacifiCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Estates and PacifiCorp.

Diversification Opportunities for Diamond Estates and PacifiCorp

0.0

Correlation Coefficient

Diamond Estates  PacifiCorp

Pay attention - limited upside

The 3 months correlation between Diamond and PacifiCorp is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Estates Wines and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp and Diamond Estates 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 Diamond Estates Wines are associated (or correlated) with PacifiCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacifiCorp has no effect on the direction of Diamond Estates i.e., Diamond Estates and PacifiCorp go up and down completely randomly.

Pair Corralation between Diamond Estates and PacifiCorp

If you would invest  100,000,000  in PacifiCorp on December 25, 2024 and sell it today you would lose (99,980,675) from holding PacifiCorp or give up 99.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	38.1%
Values	Daily Returns

Diamond Estates Wines  vs.  PacifiCorp

Diamond Estates Wines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Diamond Estates is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PacifiCorp

Risk-Adjusted Performance

Good

Over the last 90 days PacifiCorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unsteady essential indicators, PacifiCorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Estates and PacifiCorp

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

The idea behind Diamond Estates Wines and PacifiCorp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.