Correlation Between Australian United and Treasury Wine

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Can any of the company-specific risk be diversified away by investing in both Australian United and Treasury 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 Australian United and Treasury Wine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian United Investment and Treasury Wine Estates, you can compare the effects of market volatilities on Australian United and Treasury 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 Australian United with a short position of Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian United and Treasury Wine.

Diversification Opportunities for Australian United and Treasury Wine

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Australian and Treasury is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Australian United Investment and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates and Australian United 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 Australian United Investment are associated (or correlated) with Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of Australian United i.e., Australian United and Treasury Wine go up and down completely randomly.

Pair Corralation between Australian United and Treasury Wine

Assuming the 90 days trading horizon Australian United Investment is expected to under-perform the Treasury Wine. But the stock apears to be less risky and, when comparing its historical volatility, Australian United Investment is 1.95 times less risky than Treasury Wine. The stock trades about -0.15 of its potential returns per unit of risk. The Treasury Wine Estates is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,175  in Treasury Wine Estates on August 30, 2024 and sell it today you would lose (29.00) from holding Treasury Wine Estates or give up 2.47% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Australian United Investment  vs.  Treasury Wine Estates

 Performance 
       Timeline  
Australian United 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Australian United Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Australian United is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
Treasury Wine Estates 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Treasury Wine Estates are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Treasury Wine is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Australian United and Treasury Wine Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Australian United and Treasury Wine

The main advantage of trading using opposite Australian United and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian United position performs unexpectedly, Treasury 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 Treasury Wine will offset losses from the drop in Treasury Wine's long position.
The idea behind Australian United Investment and Treasury Wine Estates 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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