Correlation Between Willamette Valley and Expand Energy

Can any of the company-specific risk be diversified away by investing in both Willamette Valley and Expand Energy 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 Expand Energy 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 Expand Energy, you can compare the effects of market volatilities on Willamette Valley and Expand Energy 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 Expand Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and Expand Energy.

Diversification Opportunities for Willamette Valley and Expand Energy

-0.81

Correlation Coefficient

Willamette Valley  Expand Energy

Pay attention - limited upside

The 3 months correlation between Willamette and Expand is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Expand Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expand Energy 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 Expand Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expand Energy has no effect on the direction of Willamette Valley i.e., Willamette Valley and Expand Energy go up and down completely randomly.

Pair Corralation between Willamette Valley and Expand Energy

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Expand Energy. In addition to that, Willamette Valley is 1.01 times more volatile than Expand Energy. It trades about -0.08 of its total potential returns per unit of risk. Expand Energy is currently generating about 0.31 per unit of volatility. If you would invest  7,000  in Expand Energy on September 4, 2024 and sell it today you would earn a total of  2,798  from holding Expand Energy or generate 39.97% return on investment over 90 days.

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

Willamette Valley Vineyards  vs.  Expand Energy

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 weak 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.

Expand Energy

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expand Energy are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Expand Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Willamette Valley and Expand Energy

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

The idea behind Willamette Valley Vineyards and Expand Energy 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.