Correlation Between Treasury Wine and Mineral Resources

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

Diversification Opportunities for Treasury Wine and Mineral Resources

0.53

Correlation Coefficient

Treasury Wine  Mineral Resources

Very weak diversification

The 3 months correlation between Treasury and Mineral is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Mineral Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral Resources 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 Mineral Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Resources has no effect on the direction of Treasury Wine i.e., Treasury Wine and Mineral Resources go up and down completely randomly.

Pair Corralation between Treasury Wine and Mineral Resources

Assuming the 90 days trading horizon Treasury Wine Estates is expected to generate 0.33 times more return on investment than Mineral Resources. However, Treasury Wine Estates is 3.06 times less risky than Mineral Resources. It trades about -0.06 of its potential returns per unit of risk. Mineral Resources is currently generating about -0.16 per unit of risk. If you would invest  1,191  in Treasury Wine Estates on October 7, 2024 and sell it today you would lose (63.00) from holding Treasury Wine Estates or give up 5.29% of portfolio value over 90 days.

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

Treasury Wine Estates  vs.  Mineral Resources

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.

Mineral Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mineral Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Treasury Wine and Mineral Resources

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

The idea behind Treasury Wine Estates and Mineral Resources 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.