Correlation Between Treasury Wine and Australian Unity

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

Diversification Opportunities for Treasury Wine and Australian Unity

-0.01

Correlation Coefficient

Treasury Wine  Australian Unity

Good diversification

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

Pair Corralation between Treasury Wine and Australian Unity

Assuming the 90 days trading horizon Treasury Wine Estates is expected to generate 0.71 times more return on investment than Australian Unity. However, Treasury Wine Estates is 1.41 times less risky than Australian Unity. It trades about 0.0 of its potential returns per unit of risk. Australian Unity Office is currently generating about 0.0 per unit of risk. If you would invest  1,248  in Treasury Wine Estates on September 29, 2024 and sell it today you would lose (94.00) from holding Treasury Wine Estates or give up 7.53% of portfolio value over 90 days.

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

Treasury Wine Estates  vs.  Australian Unity Office

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 comparatively stable technical and fundamental indicators, Treasury Wine is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Australian Unity Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Unity Office has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Australian Unity is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Treasury Wine and Australian Unity

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

The idea behind Treasury Wine Estates and Australian Unity Office 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.