Correlation Between New China and Treasury Wine
Can any of the company-specific risk be diversified away by investing in both New China 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 New China and Treasury Wine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New China Life and Treasury Wine Estates, you can compare the effects of market volatilities on New China 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 New China with a short position of Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of New China and Treasury Wine.
Diversification Opportunities for New China and Treasury Wine
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between New and Treasury is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding New China Life 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 New China 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 New China Life 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 New China i.e., New China and Treasury Wine go up and down completely randomly.
Pair Corralation between New China and Treasury Wine
Assuming the 90 days trading horizon New China Life is expected to generate 3.05 times more return on investment than Treasury Wine. However, New China is 3.05 times more volatile than Treasury Wine Estates. It trades about 0.23 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about 0.2 per unit of risk. If you would invest 256.00 in New China Life on September 14, 2024 and sell it today you would earn a total of 58.00 from holding New China Life or generate 22.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New China Life vs. Treasury Wine Estates
Performance |
| Timeline |
| New China Life |
| Treasury Wine Estates |
New China and Treasury Wine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New China and Treasury Wine
The main advantage of trading using opposite New China and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New China 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.| New China vs. Treasury Wine Estates | New China vs. WT OFFSHORE | New China vs. RELIANCE STEEL AL | New China vs. MITSUBISHI STEEL MFG |
| Treasury Wine vs. Diageo plc | Treasury Wine vs. Thai Beverage Public | Treasury Wine vs. Rmy Cointreau SA |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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