Correlation Between Tinley Beverage and Fresh Grapes

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

Diversification Opportunities for Tinley Beverage and Fresh Grapes

-0.08

Correlation Coefficient

Tinley Beverage  Fresh Grapes

Good diversification

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

Pair Corralation between Tinley Beverage and Fresh Grapes

Assuming the 90 days horizon The Tinley Beverage is expected to generate 2.26 times more return on investment than Fresh Grapes. However, Tinley Beverage is 2.26 times more volatile than Fresh Grapes LLC. It trades about 0.05 of its potential returns per unit of risk. Fresh Grapes LLC is currently generating about 0.03 per unit of risk. If you would invest  2.30  in The Tinley Beverage on December 28, 2024 and sell it today you would lose (0.20) from holding The Tinley Beverage or give up 8.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

The Tinley Beverage  vs.  Fresh Grapes LLC

Tinley Beverage

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Tinley Beverage are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, Tinley Beverage reported solid returns over the last few months and may actually be approaching a breakup point.

Fresh Grapes LLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Grapes LLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Fresh Grapes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tinley Beverage and Fresh Grapes

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

The idea behind The Tinley Beverage and Fresh Grapes LLC 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.

Check out your portfolio center.

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.