Correlation Between Vodka Brands and Willamette Valley

Can any of the company-specific risk be diversified away by investing in both Vodka Brands and Willamette Valley 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 Vodka Brands and Willamette Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vodka Brands Corp and Willamette Valley Vineyards, you can compare the effects of market volatilities on Vodka Brands and Willamette Valley 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 Vodka Brands with a short position of Willamette Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodka Brands and Willamette Valley.

Diversification Opportunities for Vodka Brands and Willamette Valley

0.42

Correlation Coefficient

Vodka Brands  Willamette Valley

Very weak diversification

The 3 months correlation between Vodka and Willamette is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Vodka Brands Corp and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley and Vodka Brands 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 Vodka Brands Corp are associated (or correlated) with Willamette Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willamette Valley has no effect on the direction of Vodka Brands i.e., Vodka Brands and Willamette Valley go up and down completely randomly.

Pair Corralation between Vodka Brands and Willamette Valley

Given the investment horizon of 90 days Vodka Brands is expected to generate 2.72 times less return on investment than Willamette Valley. In addition to that, Vodka Brands is 1.04 times more volatile than Willamette Valley Vineyards. It trades about 0.14 of its total potential returns per unit of risk. Willamette Valley Vineyards is currently generating about 0.4 per unit of volatility. If you would invest  330.00  in Willamette Valley Vineyards on October 22, 2024 and sell it today you would earn a total of  140.00  from holding Willamette Valley Vineyards or generate 42.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Vodka Brands Corp  vs.  Willamette Valley Vineyards

Vodka Brands Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vodka Brands Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, Vodka Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Willamette Valley

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Willamette Valley Vineyards are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Willamette Valley demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vodka Brands and Willamette Valley

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

The idea behind Vodka Brands Corp and Willamette Valley Vineyards 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.