Correlation Between Treasury Wine and CDL INVESTMENT

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

Diversification Opportunities for Treasury Wine and CDL INVESTMENT

-0.1

Correlation Coefficient

Treasury Wine  CDL INVESTMENT

Good diversification

The 3 months correlation between Treasury and CDL is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and CDL INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDL INVESTMENT 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 CDL INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDL INVESTMENT has no effect on the direction of Treasury Wine i.e., Treasury Wine and CDL INVESTMENT go up and down completely randomly.

Pair Corralation between Treasury Wine and CDL INVESTMENT

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the CDL INVESTMENT. But the stock apears to be less risky and, when comparing its historical volatility, Treasury Wine Estates is 1.27 times less risky than CDL INVESTMENT. The stock trades about -0.01 of its potential returns per unit of risk. The CDL INVESTMENT is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  39.00  in CDL INVESTMENT on September 3, 2024 and sell it today you would earn a total of  4.00  from holding CDL INVESTMENT or generate 10.26% return on investment over 90 days.

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

Treasury Wine Estates  vs.  CDL INVESTMENT

Treasury Wine Estates

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Treasury Wine Estates are ranked lower than 2 (%) 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.

CDL INVESTMENT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Treasury Wine and CDL INVESTMENT

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

The idea behind Treasury Wine Estates and CDL INVESTMENT 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.