Correlation Between ITALIAN WINE and AUSNUTRIA DAIRY

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

By analyzing existing cross correlation between ITALIAN WINE BRANDS and AUSNUTRIA DAIRY, you can compare the effects of market volatilities on ITALIAN WINE and AUSNUTRIA DAIRY 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 ITALIAN WINE with a short position of AUSNUTRIA DAIRY. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITALIAN WINE and AUSNUTRIA DAIRY.

Diversification Opportunities for ITALIAN WINE and AUSNUTRIA DAIRY

-0.47

Correlation Coefficient

ITALIAN WINE  AUSNUTRIA DAIRY

Very good diversification

The 3 months correlation between ITALIAN and AUSNUTRIA is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and AUSNUTRIA DAIRY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUSNUTRIA DAIRY and ITALIAN 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 ITALIAN WINE BRANDS are associated (or correlated) with AUSNUTRIA DAIRY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUSNUTRIA DAIRY has no effect on the direction of ITALIAN WINE i.e., ITALIAN WINE and AUSNUTRIA DAIRY go up and down completely randomly.

Pair Corralation between ITALIAN WINE and AUSNUTRIA DAIRY

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to under-perform the AUSNUTRIA DAIRY. In addition to that, ITALIAN WINE is 2.36 times more volatile than AUSNUTRIA DAIRY. It trades about -0.02 of its total potential returns per unit of risk. AUSNUTRIA DAIRY is currently generating about 0.17 per unit of volatility. If you would invest  23.00  in AUSNUTRIA DAIRY on December 31, 2024 and sell it today you would earn a total of  3.00  from holding AUSNUTRIA DAIRY or generate 13.04% return on investment over 90 days.

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

ITALIAN WINE BRANDS  vs.  AUSNUTRIA DAIRY

ITALIAN WINE BRANDS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITALIAN WINE BRANDS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITALIAN WINE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

AUSNUTRIA DAIRY

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AUSNUTRIA DAIRY are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical indicators, AUSNUTRIA DAIRY unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITALIAN WINE and AUSNUTRIA DAIRY

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

The idea behind ITALIAN WINE BRANDS and AUSNUTRIA DAIRY 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.