Correlation Between Virgin Wines and Future Metals

Can any of the company-specific risk be diversified away by investing in both Virgin Wines and Future Metals 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 Virgin Wines and Future Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Virgin Wines UK and Future Metals NL, you can compare the effects of market volatilities on Virgin Wines and Future Metals 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 Virgin Wines with a short position of Future Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virgin Wines and Future Metals.

Diversification Opportunities for Virgin Wines and Future Metals

0.45

Correlation Coefficient

Virgin Wines  Future Metals

Very weak diversification

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

Pair Corralation between Virgin Wines and Future Metals

Assuming the 90 days trading horizon Virgin Wines UK is expected to generate 0.62 times more return on investment than Future Metals. However, Virgin Wines UK is 1.61 times less risky than Future Metals. It trades about 0.1 of its potential returns per unit of risk. Future Metals NL is currently generating about -0.03 per unit of risk. If you would invest  3,450  in Virgin Wines UK on November 30, 2024 and sell it today you would earn a total of  550.00  from holding Virgin Wines UK or generate 15.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Virgin Wines UK  vs.  Future Metals NL

Virgin Wines UK

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Wines UK are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Virgin Wines unveiled solid returns over the last few months and may actually be approaching a breakup point.

Future Metals NL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Future Metals NL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Virgin Wines and Future Metals

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

The idea behind Virgin Wines UK and Future Metals NL 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.