Correlation Between Tinley Beverage and Crimson Wine

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

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

Diversification Opportunities for Tinley Beverage and Crimson Wine

0.02

Correlation Coefficient

Tinley Beverage  Crimson Wine

Significant diversification

The 3 months correlation between Tinley and Crimson is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding The Tinley Beverage and Crimson Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crimson Wine and Tinley Beverage 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 The Tinley Beverage are associated (or correlated) with Crimson Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crimson Wine has no effect on the direction of Tinley Beverage i.e., Tinley Beverage and Crimson Wine go up and down completely randomly.

Pair Corralation between Tinley Beverage and Crimson Wine

Assuming the 90 days horizon The Tinley Beverage is expected to under-perform the Crimson Wine. In addition to that, Tinley Beverage is 4.73 times more volatile than Crimson Wine. It trades about -0.02 of its total potential returns per unit of risk. Crimson Wine is currently generating about 0.04 per unit of volatility. If you would invest  592.00  in Crimson Wine on September 23, 2024 and sell it today you would earn a total of  54.00  from holding Crimson Wine or generate 9.12% return on investment over 90 days.

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

The Tinley Beverage  vs.  Crimson Wine

Tinley Beverage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Tinley Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Crimson Wine

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crimson Wine are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Crimson Wine is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Tinley Beverage and Crimson Wine

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

The idea behind The Tinley Beverage and Crimson Wine 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.