Correlation Between Treasury Wine and Primo Brands

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

Diversification Opportunities for Treasury Wine and Primo Brands

-0.61

Correlation Coefficient

Treasury Wine  Primo Brands

Excellent diversification

The 3 months correlation between Treasury and Primo is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Primo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primo Brands 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 Primo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primo Brands has no effect on the direction of Treasury Wine i.e., Treasury Wine and Primo Brands go up and down completely randomly.

Pair Corralation between Treasury Wine and Primo Brands

Assuming the 90 days horizon Treasury Wine is expected to generate 6.83 times less return on investment than Primo Brands. In addition to that, Treasury Wine is 1.46 times more volatile than Primo Brands. It trades about 0.02 of its total potential returns per unit of risk. Primo Brands is currently generating about 0.19 per unit of volatility. If you would invest  1,258  in Primo Brands on September 19, 2024 and sell it today you would earn a total of  1,847  from holding Primo Brands or generate 146.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	77.93%
Values	Daily Returns

Treasury Wine Estates  vs.  Primo Brands

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Primo Brands

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Primo Brands are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Primo Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treasury Wine and Primo Brands

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

The idea behind Treasury Wine Estates and Primo Brands 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.