Correlation Between Willamette Valley and Crimson Wine

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

Diversification Opportunities for Willamette Valley and Crimson Wine

-0.77

Correlation Coefficient

Willamette Valley  Crimson Wine

Pay attention - limited upside

The 3 months correlation between Willamette and Crimson is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Crimson Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crimson Wine 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 Crimson Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crimson Wine has no effect on the direction of Willamette Valley i.e., Willamette Valley and Crimson Wine go up and down completely randomly.

Pair Corralation between Willamette Valley and Crimson Wine

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Crimson Wine. But the stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 1.21 times less risky than Crimson Wine. The stock trades about -0.11 of its potential returns per unit of risk. The Crimson Wine is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  595.00  in Crimson Wine on August 10, 2024 and sell it today you would earn a total of  76.00  from holding Crimson Wine or generate 12.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Willamette Valley Vineyards  vs.  Crimson Wine

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Crimson Wine

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crimson Wine are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Crimson Wine disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Willamette Valley and Crimson Wine

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

The idea behind Willamette Valley Vineyards and Crimson Wine 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.