Correlation Between Treasury Wine and K2 Asset

Can any of the company-specific risk be diversified away by investing in both Treasury Wine and K2 Asset 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 K2 Asset 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 K2 Asset Management, you can compare the effects of market volatilities on Treasury Wine and K2 Asset 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 K2 Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treasury Wine and K2 Asset.

Diversification Opportunities for Treasury Wine and K2 Asset

-0.14

Correlation Coefficient

Treasury Wine  K2 Asset

Good diversification

The 3 months correlation between Treasury and KAM is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and K2 Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K2 Asset Management 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 K2 Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K2 Asset Management has no effect on the direction of Treasury Wine i.e., Treasury Wine and K2 Asset go up and down completely randomly.

Pair Corralation between Treasury Wine and K2 Asset

Assuming the 90 days trading horizon Treasury Wine Estates is expected to under-perform the K2 Asset. But the stock apears to be less risky and, when comparing its historical volatility, Treasury Wine Estates is 3.22 times less risky than K2 Asset. The stock trades about 0.0 of its potential returns per unit of risk. The K2 Asset Management is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4.14  in K2 Asset Management on September 29, 2024 and sell it today you would earn a total of  3.36  from holding K2 Asset Management or generate 81.16% 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.  K2 Asset Management

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.

K2 Asset Management

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K2 Asset Management are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, K2 Asset unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treasury Wine and K2 Asset

The main advantage of trading using opposite Treasury Wine and K2 Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine position performs unexpectedly, K2 Asset 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 K2 Asset will offset losses from the drop in K2 Asset's long position.

The idea behind Treasury Wine Estates and K2 Asset Management 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .