Correlation Between Treasury Wine and Beach Energy

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

Diversification Opportunities for Treasury Wine and Beach Energy

-0.2

Correlation Coefficient

Treasury Wine  Beach Energy

Good diversification

The 3 months correlation between Treasury and Beach is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Beach Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beach Energy 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 Beach Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beach Energy has no effect on the direction of Treasury Wine i.e., Treasury Wine and Beach Energy go up and down completely randomly.

Pair Corralation between Treasury Wine and Beach Energy

Assuming the 90 days trading horizon Treasury Wine Estates is expected to under-perform the Beach Energy. But the stock apears to be less risky and, when comparing its historical volatility, Treasury Wine Estates is 3.02 times less risky than Beach Energy. The stock trades about -0.5 of its potential returns per unit of risk. The Beach Energy is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  122.00  in Beach Energy on October 12, 2024 and sell it today you would earn a total of  22.00  from holding Beach Energy or generate 18.03% 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.  Beach Energy

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 latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Beach Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beach Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Beach Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treasury Wine and Beach Energy

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

The idea behind Treasury Wine Estates and Beach Energy 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.