Correlation Between Willamette Valley and Greenfire Resources

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

Diversification Opportunities for Willamette Valley and Greenfire Resources

0.6

Correlation Coefficient

Willamette Valley  Greenfire Resources

Poor diversification

The 3 months correlation between Willamette and Greenfire is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Greenfire Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenfire Resources 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 Greenfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenfire Resources has no effect on the direction of Willamette Valley i.e., Willamette Valley and Greenfire Resources go up and down completely randomly.

Pair Corralation between Willamette Valley and Greenfire Resources

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Greenfire Resources. But the stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 2.2 times less risky than Greenfire Resources. The stock trades about -0.07 of its potential returns per unit of risk. The Greenfire Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  708.00  in Greenfire Resources on September 25, 2024 and sell it today you would lose (5.50) from holding Greenfire Resources or give up 0.78% of portfolio value over 90 days.

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

Willamette Valley Vineyards  vs.  Greenfire Resources

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 fairly strong basic indicators, Willamette Valley is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Greenfire Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greenfire Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Willamette Valley and Greenfire Resources

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

The idea behind Willamette Valley Vineyards and Greenfire Resources 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.