Correlation Between Firefly AB and Viva Wine

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

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

Diversification Opportunities for Firefly AB and Viva Wine

0.73

Correlation Coefficient

Firefly AB  Viva Wine

Poor diversification

The 3 months correlation between Firefly and Viva is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Firefly AB and Viva Wine Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viva Wine Group and Firefly AB 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 Firefly AB are associated (or correlated) with Viva Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viva Wine Group has no effect on the direction of Firefly AB i.e., Firefly AB and Viva Wine go up and down completely randomly.

Pair Corralation between Firefly AB and Viva Wine

Assuming the 90 days trading horizon Firefly AB is expected to generate 1.49 times more return on investment than Viva Wine. However, Firefly AB is 1.49 times more volatile than Viva Wine Group. It trades about 0.07 of its potential returns per unit of risk. Viva Wine Group is currently generating about 0.0 per unit of risk. If you would invest  8,483  in Firefly AB on October 26, 2024 and sell it today you would earn a total of  9,617  from holding Firefly AB or generate 113.37% return on investment over 90 days.

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

Firefly AB  vs.  Viva Wine Group

Firefly AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Firefly AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Viva Wine Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viva Wine Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Viva Wine is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Firefly AB and Viva Wine

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

The idea behind Firefly AB and Viva Wine Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.