Correlation Between Willamette Valley and Employers Holdings

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

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

Diversification Opportunities for Willamette Valley and Employers Holdings

-0.54

Correlation Coefficient

Willamette Valley  Employers Holdings

Excellent diversification

The 3 months correlation between Willamette and Employers is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Employers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Employers Holdings and Willamette Valley 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 Willamette Valley Vineyards are associated (or correlated) with Employers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Employers Holdings has no effect on the direction of Willamette Valley i.e., Willamette Valley and Employers Holdings go up and down completely randomly.

Pair Corralation between Willamette Valley and Employers Holdings

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to generate 3.39 times more return on investment than Employers Holdings. However, Willamette Valley is 3.39 times more volatile than Employers Holdings. It trades about 0.26 of its potential returns per unit of risk. Employers Holdings is currently generating about -0.07 per unit of risk. If you would invest  331.00  in Willamette Valley Vineyards on December 5, 2024 and sell it today you would earn a total of  267.00  from holding Willamette Valley Vineyards or generate 80.66% return on investment over 90 days.

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

Willamette Valley Vineyards  vs.  Employers Holdings

Willamette Valley

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Willamette Valley Vineyards are ranked lower than 20 (%) 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.

Employers Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Employers Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Employers Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Willamette Valley and Employers Holdings

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

The idea behind Willamette Valley Vineyards and Employers Holdings 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.