Correlation Between Iconic Brands and Crimson Wine

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

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

Diversification Opportunities for Iconic Brands and Crimson Wine

0.0

Correlation Coefficient

Iconic Brands  Crimson Wine

Pay attention - limited upside

The 3 months correlation between Iconic and Crimson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Iconic Brands and Crimson Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crimson Wine and Iconic Brands 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 Iconic Brands 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 Iconic Brands i.e., Iconic Brands and Crimson Wine go up and down completely randomly.

Pair Corralation between Iconic Brands and Crimson Wine

Given the investment horizon of 90 days Iconic Brands is expected to generate 61.94 times more return on investment than Crimson Wine. However, Iconic Brands is 61.94 times more volatile than Crimson Wine. It trades about 0.12 of its potential returns per unit of risk. Crimson Wine is currently generating about 0.04 per unit of risk. If you would invest  0.00  in Iconic Brands on September 23, 2024 and sell it today you would earn a total of  0.01  from holding Iconic Brands or generate 9.223372036854776E16% return on investment over 90 days.

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

Iconic Brands  vs.  Crimson Wine

Iconic Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iconic Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iconic Brands is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Iconic Brands and Crimson Wine

The main advantage of trading using opposite Iconic Brands and Crimson Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iconic Brands 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 Iconic Brands 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.