Correlation Between Treasury Wine and EROAD

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

Diversification Opportunities for Treasury Wine and EROAD

0.45

Correlation Coefficient

Treasury Wine  EROAD

Very weak diversification

The 3 months correlation between Treasury and EROAD is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD 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 EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Treasury Wine i.e., Treasury Wine and EROAD go up and down completely randomly.

Pair Corralation between Treasury Wine and EROAD

Assuming the 90 days trading horizon Treasury Wine is expected to generate 1.44 times less return on investment than EROAD. But when comparing it to its historical volatility, Treasury Wine Estates is 2.45 times less risky than EROAD. It trades about 0.03 of its potential returns per unit of risk. EROAD is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  93.00  in EROAD on October 3, 2024 and sell it today you would earn a total of  2.00  from holding EROAD or generate 2.15% return on investment over 90 days.

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

Treasury Wine Estates  vs.  EROAD

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.

EROAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EROAD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, EROAD 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 EROAD

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

The idea behind Treasury Wine Estates and EROAD 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.