Correlation Between Willamette Valley and Hanover Foods
Can any of the company-specific risk be diversified away by investing in both Willamette Valley and Hanover Foods 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 Willamette Valley and Hanover Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Willamette Valley Vineyards and Hanover Foods, you can compare the effects of market volatilities on Willamette Valley and Hanover Foods 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 Willamette Valley with a short position of Hanover Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and Hanover Foods.
Diversification Opportunities for Willamette Valley and Hanover Foods
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Willamette and Hanover is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Hanover Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Foods and Willamette Valley 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 Willamette Valley Vineyards are associated (or correlated) with Hanover Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Foods has no effect on the direction of Willamette Valley i.e., Willamette Valley and Hanover Foods go up and down completely randomly.
Pair Corralation between Willamette Valley and Hanover Foods
Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Hanover Foods. In addition to that, Willamette Valley is 1.2 times more volatile than Hanover Foods. It trades about -0.05 of its total potential returns per unit of risk. Hanover Foods is currently generating about 0.05 per unit of volatility. If you would invest 4,972 in Hanover Foods on September 2, 2024 and sell it today you would earn a total of 1,328 from holding Hanover Foods or generate 26.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 80.24% |
| Values | Daily Returns |
Willamette Valley Vineyards vs. Hanover Foods
Performance |
| Timeline |
| Willamette Valley |
| Hanover Foods |
Willamette Valley and Hanover Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Willamette Valley and Hanover Foods
The main advantage of trading using opposite Willamette Valley and Hanover Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley position performs unexpectedly, Hanover Foods 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 Hanover Foods will offset losses from the drop in Hanover Foods' long position.| Willamette Valley vs. Brown Forman | Willamette Valley vs. Duckhorn Portfolio | Willamette Valley vs. Brown Forman | Willamette Valley vs. Constellation Brands Class |
| Hanover Foods vs. Signet International Holdings | Hanover Foods vs. National Beverage Corp | Hanover Foods vs. PT Astra International | Hanover Foods vs. Vita Coco |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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