Correlation Between Treasury Wine and Sealed Air

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

Diversification Opportunities for Treasury Wine and Sealed Air

-0.08

Correlation Coefficient

Treasury Wine  Sealed Air

Good diversification

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

Pair Corralation between Treasury Wine and Sealed Air

Assuming the 90 days horizon Treasury Wine Estates is expected to generate 1.41 times more return on investment than Sealed Air. However, Treasury Wine is 1.41 times more volatile than Sealed Air. It trades about 0.1 of its potential returns per unit of risk. Sealed Air is currently generating about -0.22 per unit of risk. If you would invest  685.00  in Treasury Wine Estates on September 25, 2024 and sell it today you would earn a total of  25.00  from holding Treasury Wine Estates or generate 3.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Treasury Wine Estates  vs.  Sealed Air

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.

Sealed Air

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sealed Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Sealed Air is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Treasury Wine and Sealed Air

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

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