Correlation Between Willamette Valley and Usio

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

Diversification Opportunities for Willamette Valley and Usio

0.7

Correlation Coefficient

Willamette Valley  Usio

Poor diversification

The 3 months correlation between Willamette and Usio is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Usio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Usio 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 Usio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Usio Inc has no effect on the direction of Willamette Valley i.e., Willamette Valley and Usio go up and down completely randomly.

Pair Corralation between Willamette Valley and Usio

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Usio. But the stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 1.61 times less risky than Usio. The stock trades about -0.01 of its potential returns per unit of risk. The Usio Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  186.00  in Usio Inc on October 22, 2024 and sell it today you would earn a total of  57.00  from holding Usio Inc or generate 30.65% return on investment over 90 days.

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

Willamette Valley Vineyards  vs.  Usio Inc

Willamette Valley

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Willamette Valley Vineyards are ranked lower than 14 (%) 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.

Usio Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Usio Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Usio displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Willamette Valley and Usio

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

The idea behind Willamette Valley Vineyards and Usio 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.