Correlation Between WA1 Resources and Treasury Wine

Can any of the company-specific risk be diversified away by investing in both WA1 Resources 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 WA1 Resources and Treasury Wine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WA1 Resources and Treasury Wine Estates, you can compare the effects of market volatilities on WA1 Resources 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 WA1 Resources with a short position of Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of WA1 Resources and Treasury Wine.

Diversification Opportunities for WA1 Resources and Treasury Wine

0.03

Correlation Coefficient

WA1 Resources  Treasury Wine

Significant diversification

The 3 months correlation between WA1 and Treasury is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding WA1 Resources 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 WA1 Resources 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 WA1 Resources 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 WA1 Resources i.e., WA1 Resources and Treasury Wine go up and down completely randomly.

Pair Corralation between WA1 Resources and Treasury Wine

Assuming the 90 days trading horizon WA1 Resources is expected to generate 2.23 times more return on investment than Treasury Wine. However, WA1 Resources is 2.23 times more volatile than Treasury Wine Estates. It trades about 0.04 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about -0.11 per unit of risk. If you would invest  1,301  in WA1 Resources on December 29, 2024 and sell it today you would earn a total of  84.00  from holding WA1 Resources or generate 6.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

WA1 Resources  vs.  Treasury Wine Estates

WA1 Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WA1 Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WA1 Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Treasury Wine Estates

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with WA1 Resources and Treasury Wine

The main advantage of trading using opposite WA1 Resources and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WA1 Resources 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 WA1 Resources 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.