Correlation Between Willamette Valley and Fresh Grapes

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

Diversification Opportunities for Willamette Valley and Fresh Grapes

0.22

Correlation Coefficient

Willamette Valley  Fresh Grapes

Modest diversification

The 3 months correlation between Willamette and Fresh is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Fresh Grapes LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresh Grapes LLC 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 Fresh Grapes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresh Grapes LLC has no effect on the direction of Willamette Valley i.e., Willamette Valley and Fresh Grapes go up and down completely randomly.

Pair Corralation between Willamette Valley and Fresh Grapes

Assuming the 90 days horizon Willamette Valley is expected to generate 10.04 times less return on investment than Fresh Grapes. But when comparing it to its historical volatility, Willamette Valley Vineyards is 3.22 times less risky than Fresh Grapes. It trades about 0.01 of its potential returns per unit of risk. Fresh Grapes LLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  57.00  in Fresh Grapes LLC on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Fresh Grapes LLC or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.94%
Values	Daily Returns

Willamette Valley Vineyards  vs.  Fresh Grapes LLC

Willamette Valley

Risk-Adjusted Performance

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.

Fresh Grapes LLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Grapes LLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Fresh Grapes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Willamette Valley and Fresh Grapes

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

The idea behind Willamette Valley Vineyards and Fresh Grapes LLC 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.