Correlation Between Willamette Valley and Connecticut Light

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

Diversification Opportunities for Willamette Valley and Connecticut Light

-0.09

Correlation Coefficient

Willamette Valley  Connecticut Light

Good diversification

The 3 months correlation between Willamette and Connecticut is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and The Connecticut Light in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connecticut Light 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 Connecticut Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connecticut Light has no effect on the direction of Willamette Valley i.e., Willamette Valley and Connecticut Light go up and down completely randomly.

Pair Corralation between Willamette Valley and Connecticut Light

Assuming the 90 days horizon Willamette Valley is expected to generate 5.77 times less return on investment than Connecticut Light. In addition to that, Willamette Valley is 1.93 times more volatile than The Connecticut Light. It trades about 0.01 of its total potential returns per unit of risk. The Connecticut Light is currently generating about 0.14 per unit of volatility. If you would invest  3,692  in The Connecticut Light on December 24, 2024 and sell it today you would earn a total of  333.00  from holding The Connecticut Light or generate 9.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.33%
Values	Daily Returns

Willamette Valley Vineyards  vs.  The Connecticut Light

Willamette Valley

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Willamette Valley Vineyards are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Willamette Valley is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Connecticut Light

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Connecticut Light are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical indicators, Connecticut Light may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Willamette Valley and Connecticut Light

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

The idea behind Willamette Valley Vineyards and The Connecticut Light 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.