Correlation Between Treasury Wine and Awilco Drilling

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

Diversification Opportunities for Treasury Wine and Awilco Drilling

0.74

Correlation Coefficient

Treasury Wine  Awilco Drilling

Poor diversification

The 3 months correlation between Treasury and Awilco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Awilco Drilling PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awilco Drilling PLC 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 Awilco Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awilco Drilling PLC has no effect on the direction of Treasury Wine i.e., Treasury Wine and Awilco Drilling go up and down completely randomly.

Pair Corralation between Treasury Wine and Awilco Drilling

Assuming the 90 days horizon Treasury Wine is expected to generate 82.08 times less return on investment than Awilco Drilling. In addition to that, Treasury Wine is 1.02 times more volatile than Awilco Drilling PLC. It trades about 0.0 of its total potential returns per unit of risk. Awilco Drilling PLC is currently generating about 0.05 per unit of volatility. If you would invest  146.00  in Awilco Drilling PLC on October 24, 2024 and sell it today you would earn a total of  35.00  from holding Awilco Drilling PLC or generate 23.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.2%
Values	Daily Returns

Treasury Wine Estates  vs.  Awilco Drilling PLC

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Awilco Drilling PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Awilco Drilling PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Treasury Wine and Awilco Drilling

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

The idea behind Treasury Wine Estates and Awilco Drilling PLC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.