Correlation Between SGS SA and Willamette Valley
Can any of the company-specific risk be diversified away by investing in both SGS SA 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 SGS SA and Willamette Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SGS SA and Willamette Valley Vineyards, you can compare the effects of market volatilities on SGS SA 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 SGS SA with a short position of Willamette Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of SGS SA and Willamette Valley.
Diversification Opportunities for SGS SA and Willamette Valley
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SGS and Willamette is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley and SGS SA 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 SGS SA 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 SGS SA i.e., SGS SA and Willamette Valley go up and down completely randomly.
Pair Corralation between SGS SA and Willamette Valley
Assuming the 90 days horizon SGS SA is expected to generate 0.68 times more return on investment than Willamette Valley. However, SGS SA is 1.47 times less risky than Willamette Valley. It trades about 0.05 of its potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.05 per unit of risk. If you would invest 907.00 in SGS SA on September 3, 2024 and sell it today you would earn a total of 80.00 from holding SGS SA or generate 8.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SGS SA vs. Willamette Valley Vineyards
Performance |
| Timeline |
| SGS SA |
| Willamette Valley |
SGS SA and Willamette Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SGS SA and Willamette Valley
The main advantage of trading using opposite SGS SA and Willamette Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SGS SA 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 SGS SA 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.| Willamette Valley vs. Naked Wines plc | Willamette Valley vs. Andrew Peller Limited | Willamette Valley vs. Iconic Brands | Willamette Valley vs. Naked Wines plc |
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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