Correlation Between Willamette Valley and 437076BW1

Can any of the company-specific risk be diversified away by investing in both Willamette Valley and 437076BW1 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 437076BW1 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 HOME DEPOT INC, you can compare the effects of market volatilities on Willamette Valley and 437076BW1 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 437076BW1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and 437076BW1.

Diversification Opportunities for Willamette Valley and 437076BW1

0.62

Correlation Coefficient

Willamette Valley  437076BW1

Poor diversification

The 3 months correlation between Willamette and 437076BW1 is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and HOME DEPOT INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOME DEPOT INC 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 437076BW1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOME DEPOT INC has no effect on the direction of Willamette Valley i.e., Willamette Valley and 437076BW1 go up and down completely randomly.

Pair Corralation between Willamette Valley and 437076BW1

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the 437076BW1. In addition to that, Willamette Valley is 5.57 times more volatile than HOME DEPOT INC. It trades about -0.08 of its total potential returns per unit of risk. HOME DEPOT INC is currently generating about -0.16 per unit of volatility. If you would invest  9,967  in HOME DEPOT INC on September 5, 2024 and sell it today you would lose (313.00) from holding HOME DEPOT INC or give up 3.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Willamette Valley Vineyards  vs.  HOME DEPOT INC

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.

HOME DEPOT INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HOME DEPOT INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 437076BW1 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Willamette Valley and 437076BW1

The main advantage of trading using opposite Willamette Valley and 437076BW1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley position performs unexpectedly, 437076BW1 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 437076BW1 will offset losses from the drop in 437076BW1's long position.

The idea behind Willamette Valley Vineyards and HOME DEPOT INC 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.