Correlation Between Sealed Air and Treasury Wine

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

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

Diversification Opportunities for Sealed Air and Treasury Wine

-0.08

Correlation Coefficient

Sealed Air  Treasury Wine

Good diversification

The 3 months correlation between Sealed and Treasury is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates and Sealed Air 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 Sealed Air are associated (or correlated) with Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of Sealed Air i.e., Sealed Air and Treasury Wine go up and down completely randomly.

Pair Corralation between Sealed Air and Treasury Wine

Considering the 90-day investment horizon Sealed Air is expected to under-perform the Treasury Wine. But the stock apears to be less risky and, when comparing its historical volatility, Sealed Air is 1.41 times less risky than Treasury Wine. The stock trades about -0.22 of its potential returns per unit of risk. The Treasury Wine Estates is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  685.00  in Treasury Wine Estates on September 25, 2024 and sell it today you would earn a total of  25.00  from holding Treasury Wine Estates or generate 3.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Sealed Air  vs.  Treasury Wine Estates

Sealed Air

Risk-Adjusted Performance

0 of 100

Very Weak

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

Treasury Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sealed Air and Treasury Wine

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

The idea behind Sealed Air and Treasury Wine Estates 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.