Correlation Between Treasury Wine and First Republic

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

Diversification Opportunities for Treasury Wine and First Republic

-0.01

Correlation Coefficient

Treasury Wine  First Republic

Good diversification

The 3 months correlation between Treasury and First is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and First Republic Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Republic Bank 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 First Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Republic Bank has no effect on the direction of Treasury Wine i.e., Treasury Wine and First Republic go up and down completely randomly.

Pair Corralation between Treasury Wine and First Republic

Assuming the 90 days horizon Treasury Wine Estates is expected to generate 0.11 times more return on investment than First Republic. However, Treasury Wine Estates is 9.47 times less risky than First Republic. It trades about 0.0 of its potential returns per unit of risk. First Republic Bank is currently generating about -0.01 per unit of risk. If you would invest  913.00  in Treasury Wine Estates on September 23, 2024 and sell it today you would lose (178.00) from holding Treasury Wine Estates or give up 19.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	36.13%
Values	Daily Returns

Treasury Wine Estates  vs.  First Republic Bank

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 nearly stable basic indicators, Treasury Wine is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

First Republic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Republic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, First Republic 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 Treasury Wine and First Republic

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

The idea behind Treasury Wine Estates and First Republic Bank 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.