Correlation Between Treasury Wine and MAGNUM DCORP

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

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

Diversification Opportunities for Treasury Wine and MAGNUM DCORP

0.04

Correlation Coefficient

Treasury Wine  MAGNUM DCORP

Significant diversification

The 3 months correlation between Treasury and MAGNUM is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and MAGNUM DCORP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAGNUM DCORP INC and Treasury 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 Treasury Wine Estates are associated (or correlated) with MAGNUM DCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAGNUM DCORP INC has no effect on the direction of Treasury Wine i.e., Treasury Wine and MAGNUM DCORP go up and down completely randomly.

Pair Corralation between Treasury Wine and MAGNUM DCORP

Assuming the 90 days horizon Treasury Wine is expected to generate 390.89 times less return on investment than MAGNUM DCORP. But when comparing it to its historical volatility, Treasury Wine Estates is 54.46 times less risky than MAGNUM DCORP. It trades about 0.03 of its potential returns per unit of risk. MAGNUM DCORP INC is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  0.80  in MAGNUM DCORP INC on September 20, 2024 and sell it today you would earn a total of  2.41  from holding MAGNUM DCORP INC or generate 301.25% return on investment over 90 days.

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

Treasury Wine Estates  vs.  MAGNUM DCORP INC

Treasury Wine Estates

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Treasury Wine Estates are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

MAGNUM DCORP INC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MAGNUM DCORP INC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, MAGNUM DCORP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treasury Wine and MAGNUM DCORP

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

The idea behind Treasury Wine Estates and MAGNUM DCORP INC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.