Correlation Between Woolworths and Treasury Wine
Can any of the company-specific risk be diversified away by investing in both Woolworths 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 Woolworths and Treasury Wine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woolworths and Treasury Wine Estates, you can compare the effects of market volatilities on Woolworths 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 Woolworths with a short position of Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woolworths and Treasury Wine.
Diversification Opportunities for Woolworths and Treasury Wine
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Woolworths and Treasury is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths 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 Woolworths 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 Woolworths 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 Woolworths i.e., Woolworths and Treasury Wine go up and down completely randomly.
Pair Corralation between Woolworths and Treasury Wine
Assuming the 90 days trading horizon Woolworths is expected to generate 1.11 times less return on investment than Treasury Wine. But when comparing it to its historical volatility, Woolworths is 2.32 times less risky than Treasury Wine. It trades about 0.22 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,050 in Treasury Wine Estates on November 27, 2024 and sell it today you would earn a total of 40.00 from holding Treasury Wine Estates or generate 3.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woolworths vs. Treasury Wine Estates
Performance |
| Timeline |
| Woolworths |
| Treasury Wine Estates |
Woolworths and Treasury Wine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woolworths and Treasury Wine
The main advantage of trading using opposite Woolworths and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woolworths 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.| Woolworths vs. Tambourah Metals | Woolworths vs. Nufarm Finance NZ | Woolworths vs. Catalyst Metals | Woolworths vs. Australian Agricultural |
| Treasury Wine vs. Regal Funds Management | Treasury Wine vs. Pinnacle Investment Management | Treasury Wine vs. Data3 | Treasury Wine vs. Air New Zealand |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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