Correlation Between Treasury Wine and Clean Energy
Can any of the company-specific risk be diversified away by investing in both Treasury Wine and Clean Energy 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 Treasury Wine and Clean Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Treasury Wine Estates and Clean Energy Fuels, you can compare the effects of market volatilities on Treasury Wine and Clean Energy 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 Treasury Wine with a short position of Clean Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treasury Wine and Clean Energy.
Diversification Opportunities for Treasury Wine and Clean Energy
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Treasury and Clean is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Clean Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Energy Fuels and Treasury Wine 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 Treasury Wine Estates are associated (or correlated) with Clean Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Energy Fuels has no effect on the direction of Treasury Wine i.e., Treasury Wine and Clean Energy go up and down completely randomly.
Pair Corralation between Treasury Wine and Clean Energy
Assuming the 90 days horizon Treasury Wine Estates is expected to generate 0.48 times more return on investment than Clean Energy. However, Treasury Wine Estates is 2.08 times less risky than Clean Energy. It trades about -0.01 of its potential returns per unit of risk. Clean Energy Fuels is currently generating about -0.01 per unit of risk. If you would invest 810.00 in Treasury Wine Estates on September 3, 2024 and sell it today you would lose (118.00) from holding Treasury Wine Estates or give up 14.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Treasury Wine Estates vs. Clean Energy Fuels
Performance |
| Timeline |
| Treasury Wine Estates |
| Clean Energy Fuels |
Treasury Wine and Clean Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Treasury Wine and Clean Energy
The main advantage of trading using opposite Treasury Wine and Clean Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine position performs unexpectedly, Clean Energy 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 Clean Energy will offset losses from the drop in Clean Energy's long position.The idea behind Treasury Wine Estates and Clean Energy Fuels 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.| Clean Energy vs. Marathon Petroleum Corp | Clean Energy vs. Neste Oyj | Clean Energy vs. ENEOS Holdings | Clean Energy vs. PTT OILRETBUS FOR BA10 |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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