Correlation Between Vintage Wine and Treasury Wine

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

By analyzing existing cross correlation between Vintage Wine Estates and Treasury Wine Estates, you can compare the effects of market volatilities on Vintage Wine and Treasury Wine 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 Vintage Wine with a short position of Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vintage Wine and Treasury Wine.

Diversification Opportunities for Vintage Wine and Treasury Wine

0.02

Correlation Coefficient

Vintage Wine  Treasury Wine

Significant diversification

The 3 months correlation between Vintage and Treasury is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Vintage Wine Estates and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates and Vintage 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 Vintage Wine Estates are associated (or correlated) with Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of Vintage Wine i.e., Vintage Wine and Treasury Wine go up and down completely randomly.

Pair Corralation between Vintage Wine and Treasury Wine

Considering the 90-day investment horizon Vintage Wine Estates is expected to generate 10.75 times more return on investment than Treasury Wine. However, Vintage Wine is 10.75 times more volatile than Treasury Wine Estates. It trades about 0.03 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about -0.01 per unit of risk. If you would invest  0.27  in Vintage Wine Estates on September 12, 2024 and sell it today you would lose (0.07) from holding Vintage Wine Estates or give up 25.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	26.98%
Values	Daily Returns

Vintage Wine Estates  vs.  Treasury Wine Estates

Vintage Wine Estates

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Vintage Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather inconsistent basic indicators, Vintage Wine exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 fairly strong basic indicators, Treasury Wine is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vintage Wine and Treasury Wine

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

The idea behind Vintage Wine Estates and Treasury Wine Estates 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.