Correlation Between ITALIAN WINE and CHEMICAL INDUSTRIES

Can any of the company-specific risk be diversified away by investing in both ITALIAN WINE and CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES, you can compare the effects of market volatilities on ITALIAN WINE and CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITALIAN WINE and CHEMICAL INDUSTRIES.

Diversification Opportunities for ITALIAN WINE and CHEMICAL INDUSTRIES

0.0

Correlation Coefficient

ITALIAN WINE  CHEMICAL INDUSTRIES

Pay attention - limited upside

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

Pair Corralation between ITALIAN WINE and CHEMICAL INDUSTRIES

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to generate 4.87 times more return on investment than CHEMICAL INDUSTRIES. However, ITALIAN WINE is 4.87 times more volatile than CHEMICAL INDUSTRIES. It trades about 0.07 of its potential returns per unit of risk. CHEMICAL INDUSTRIES is currently generating about 0.09 per unit of risk. If you would invest  2,050  in ITALIAN WINE BRANDS on October 4, 2024 and sell it today you would earn a total of  350.00  from holding ITALIAN WINE BRANDS or generate 17.07% return on investment over 90 days.

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

ITALIAN WINE BRANDS  vs.  CHEMICAL INDUSTRIES

ITALIAN WINE BRANDS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ITALIAN WINE BRANDS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ITALIAN WINE reported solid returns over the last few months and may actually be approaching a breakup point.

CHEMICAL INDUSTRIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHEMICAL INDUSTRIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, CHEMICAL INDUSTRIES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ITALIAN WINE and CHEMICAL INDUSTRIES

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

The idea behind ITALIAN WINE BRANDS and CHEMICAL INDUSTRIES 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.