Correlation Between Treasury Wine and Welsbach Technology

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

Diversification Opportunities for Treasury Wine and Welsbach Technology

-0.23

Correlation Coefficient

Treasury Wine  Welsbach Technology

Very good diversification

The 3 months correlation between Treasury and Welsbach is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Welsbach Technology Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welsbach Technology 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 Welsbach Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welsbach Technology has no effect on the direction of Treasury Wine i.e., Treasury Wine and Welsbach Technology go up and down completely randomly.

Pair Corralation between Treasury Wine and Welsbach Technology

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the Welsbach Technology. In addition to that, Treasury Wine is 1.78 times more volatile than Welsbach Technology Metals. It trades about -0.05 of its total potential returns per unit of risk. Welsbach Technology Metals is currently generating about 0.12 per unit of volatility. If you would invest  1,127  in Welsbach Technology Metals on October 3, 2024 and sell it today you would earn a total of  142.00  from holding Welsbach Technology Metals or generate 12.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Treasury Wine Estates  vs.  Welsbach Technology Metals

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.

Welsbach Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Welsbach Technology Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Welsbach Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treasury Wine and Welsbach Technology

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

The idea behind Treasury Wine Estates and Welsbach Technology Metals 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.