Correlation Between Treasury Wine and Vintage Wine

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

Diversification Opportunities for Treasury Wine and Vintage Wine

0.02

Correlation Coefficient

Treasury Wine  Vintage Wine

Significant diversification

The 3 months correlation between Treasury and Vintage is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Vintage Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vintage Wine Estates 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 Vintage Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vintage Wine Estates has no effect on the direction of Treasury Wine i.e., Treasury Wine and Vintage Wine go up and down completely randomly.

Pair Corralation between Treasury Wine and Vintage Wine

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the Vintage Wine. But the pink sheet apears to be less risky and, when comparing its historical volatility, Treasury Wine Estates is 10.75 times less risky than Vintage Wine. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Vintage Wine Estates is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.27  in Vintage Wine Estates on September 12, 2024 and sell it today you would lose (0.07) from holding Vintage Wine Estates or give up 25.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	26.98%
Values	Daily Returns

Treasury Wine Estates  vs.  Vintage Wine Estates

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. In spite of fairly strong basic indicators, Treasury Wine is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Vintage Wine Estates

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Vintage Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather inconsistent basic indicators, Vintage Wine exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treasury Wine and Vintage Wine

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

The idea behind Treasury Wine Estates and Vintage Wine Estates 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.