Correlation Between Fresh Grapes and Willamette Valley

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

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

Diversification Opportunities for Fresh Grapes and Willamette Valley

-0.11

Correlation Coefficient

Fresh Grapes  Willamette Valley

Good diversification

The 3 months correlation between Fresh and Willamette is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Grapes LLC and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley and Fresh Grapes 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 Fresh Grapes LLC 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 Fresh Grapes i.e., Fresh Grapes and Willamette Valley go up and down completely randomly.

Pair Corralation between Fresh Grapes and Willamette Valley

Given the investment horizon of 90 days Fresh Grapes LLC is expected to generate 5.58 times more return on investment than Willamette Valley. However, Fresh Grapes is 5.58 times more volatile than Willamette Valley Vineyards. It trades about 0.09 of its potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.11 per unit of risk. If you would invest  53.00  in Fresh Grapes LLC on September 12, 2024 and sell it today you would earn a total of  14.00  from holding Fresh Grapes LLC or generate 26.42% return on investment over 90 days.

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

Fresh Grapes LLC  vs.  Willamette Valley Vineyards

Fresh Grapes LLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Grapes LLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Fresh Grapes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Fresh Grapes and Willamette Valley

The main advantage of trading using opposite Fresh Grapes and Willamette Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresh Grapes 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 Fresh Grapes LLC 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.