Correlation Between Prime Financial and Treasury Wine
Can any of the company-specific risk be diversified away by investing in both Prime Financial 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 Prime Financial and Treasury Wine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prime Financial Group and Treasury Wine Estates, you can compare the effects of market volatilities on Prime Financial 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 Prime Financial with a short position of Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Financial and Treasury Wine.
Diversification Opportunities for Prime Financial and Treasury Wine
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Prime and Treasury is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Prime Financial Group 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 Prime Financial 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 Prime Financial Group 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 Prime Financial i.e., Prime Financial and Treasury Wine go up and down completely randomly.
Pair Corralation between Prime Financial and Treasury Wine
Assuming the 90 days trading horizon Prime Financial is expected to generate 1.5 times less return on investment than Treasury Wine. In addition to that, Prime Financial is 2.14 times more volatile than Treasury Wine Estates. It trades about 0.01 of its total potential returns per unit of risk. Treasury Wine Estates is currently generating about 0.03 per unit of volatility. If you would invest 1,049 in Treasury Wine Estates on August 29, 2024 and sell it today you would earn a total of 98.00 from holding Treasury Wine Estates or generate 9.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.53% |
| Values | Daily Returns |
Prime Financial Group vs. Treasury Wine Estates
Performance |
| Timeline |
| Prime Financial Group |
| Treasury Wine Estates |
Prime Financial and Treasury Wine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prime Financial and Treasury Wine
The main advantage of trading using opposite Prime Financial and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Financial 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.| Prime Financial vs. Champion Iron | Prime Financial vs. Ridley | Prime Financial vs. Peel Mining | Prime Financial vs. Australian Dairy Farms |
| Treasury Wine vs. PVW Resources | Treasury Wine vs. Woolworths | Treasury Wine vs. Wesfarmers | Treasury Wine vs. Coles Group |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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