Correlation Between Treasury Wine and Premier Investments

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

Diversification Opportunities for Treasury Wine and Premier Investments

-0.45

Correlation Coefficient

Treasury Wine  Premier Investments

Very good diversification

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

Pair Corralation between Treasury Wine and Premier Investments

Assuming the 90 days trading horizon Treasury Wine is expected to generate 1.67 times less return on investment than Premier Investments. But when comparing it to its historical volatility, Treasury Wine Estates is 1.14 times less risky than Premier Investments. It trades about 0.05 of its potential returns per unit of risk. Premier Investments is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,572  in Premier Investments on October 6, 2024 and sell it today you would earn a total of  732.00  from holding Premier Investments or generate 28.46% return on investment over 90 days.

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

Treasury Wine Estates  vs.  Premier Investments

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.

Premier Investments

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Investments are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Premier Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Treasury Wine and Premier Investments

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

The idea behind Treasury Wine Estates and Premier Investments 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.