Correlation Between Crimson Wine and Iconic Brands

Can any of the company-specific risk be diversified away by investing in both Crimson Wine and Iconic 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 Crimson Wine and Iconic Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Crimson Wine and Iconic Brands, you can compare the effects of market volatilities on Crimson Wine and Iconic 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 Crimson Wine with a short position of Iconic Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crimson Wine and Iconic Brands.

Diversification Opportunities for Crimson Wine and Iconic Brands

0.18

Correlation Coefficient

Crimson Wine  Iconic Brands

Average diversification

The 3 months correlation between Crimson and Iconic is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Crimson Wine and Iconic Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iconic Brands and Crimson Wine 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 Crimson Wine are associated (or correlated) with Iconic Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iconic Brands has no effect on the direction of Crimson Wine i.e., Crimson Wine and Iconic Brands go up and down completely randomly.

Pair Corralation between Crimson Wine and Iconic Brands

Given the investment horizon of 90 days Crimson Wine is expected to generate 137.36 times less return on investment than Iconic Brands. But when comparing it to its historical volatility, Crimson Wine is 29.87 times less risky than Iconic Brands. It trades about 0.03 of its potential returns per unit of risk. Iconic Brands is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Iconic Brands on May 5, 2025 and sell it today you would earn a total of  0.04  from holding Iconic Brands or generate 400.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Crimson Wine  vs.  Iconic Brands

Crimson Wine

Risk-Adjusted Performance

Weak

Over the last 90 days Crimson Wine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Crimson Wine is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Iconic Brands

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iconic Brands are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Iconic Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crimson Wine and Iconic Brands

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

The idea behind Crimson Wine and Iconic Brands 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.