Correlation Between Willamette Valley and Mars Acquisition

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

Diversification Opportunities for Willamette Valley and Mars Acquisition

-0.55

Correlation Coefficient

Willamette Valley  Mars Acquisition

Excellent diversification

The 3 months correlation between Willamette and Mars is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Mars Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mars Acquisition Corp 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 Mars Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mars Acquisition Corp has no effect on the direction of Willamette Valley i.e., Willamette Valley and Mars Acquisition go up and down completely randomly.

Pair Corralation between Willamette Valley and Mars Acquisition

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Mars Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 5.23 times less risky than Mars Acquisition. The stock trades about -0.03 of its potential returns per unit of risk. The Mars Acquisition Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Mars Acquisition Corp on September 22, 2024 and sell it today you would earn a total of  7.00  from holding Mars Acquisition Corp or generate 22.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

Willamette Valley Vineyards  vs.  Mars Acquisition Corp

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.

Mars Acquisition Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mars Acquisition Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Mars Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Willamette Valley and Mars Acquisition

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

The idea behind Willamette Valley Vineyards and Mars Acquisition Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.