Correlation Between Vintage Wine and Willamette Valley

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

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

Diversification Opportunities for Vintage Wine and Willamette Valley

0.55

Correlation Coefficient

Vintage Wine  Willamette Valley

Very weak diversification

The 3 months correlation between Vintage and Willamette is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Vintage Wine Estates and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley and Vintage 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 Vintage Wine Estates are associated (or correlated) with Willamette Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willamette Valley has no effect on the direction of Vintage Wine i.e., Vintage Wine and Willamette Valley go up and down completely randomly.

Pair Corralation between Vintage Wine and Willamette Valley

Considering the 90-day investment horizon Vintage Wine Estates is expected to under-perform the Willamette Valley. In addition to that, Vintage Wine is 10.06 times more volatile than Willamette Valley Vineyards. It trades about -0.08 of its total potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.13 per unit of volatility. If you would invest  368.00  in Willamette Valley Vineyards on July 10, 2024 and sell it today you would lose (22.00) from holding Willamette Valley Vineyards or give up 5.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

Vintage Wine Estates  vs.  Willamette Valley Vineyards

Vintage Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vintage Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in November 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Vintage Wine and Willamette Valley

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

The idea behind Vintage Wine Estates and Willamette Valley Vineyards 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.