Correlation Between Willamette Valley and Imperial Brands

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

Diversification Opportunities for Willamette Valley and Imperial Brands

-0.29

Correlation Coefficient

Willamette Valley  Imperial Brands

Very good diversification

The 3 months correlation between Willamette and Imperial is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Imperial Brands PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Brands PLC 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 Imperial Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Brands PLC has no effect on the direction of Willamette Valley i.e., Willamette Valley and Imperial Brands go up and down completely randomly.

Pair Corralation between Willamette Valley and Imperial Brands

Assuming the 90 days horizon Willamette Valley is expected to generate 1.85 times less return on investment than Imperial Brands. In addition to that, Willamette Valley is 2.41 times more volatile than Imperial Brands PLC. It trades about 0.05 of its total potential returns per unit of risk. Imperial Brands PLC is currently generating about 0.21 per unit of volatility. If you would invest  3,094  in Imperial Brands PLC on September 22, 2024 and sell it today you would earn a total of  134.00  from holding Imperial Brands PLC or generate 4.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Willamette Valley Vineyards  vs.  Imperial Brands PLC

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. 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.

Imperial Brands PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Brands PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental drivers, Imperial Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Willamette Valley and Imperial Brands

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

The idea behind Willamette Valley Vineyards and Imperial Brands PLC 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.