Correlation Between Willamette Valley and Brown Forman
Can any of the company-specific risk be diversified away by investing in both Willamette Valley and Brown Forman 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 Brown Forman 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 Brown Forman, you can compare the effects of market volatilities on Willamette Valley and Brown Forman 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 Brown Forman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and Brown Forman.
Diversification Opportunities for Willamette Valley and Brown Forman
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Willamette and Brown is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman 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 Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of Willamette Valley i.e., Willamette Valley and Brown Forman go up and down completely randomly.
Pair Corralation between Willamette Valley and Brown Forman
Assuming the 90 days horizon Willamette Valley Vineyards is expected to generate 1.76 times more return on investment than Brown Forman. However, Willamette Valley is 1.76 times more volatile than Brown Forman. It trades about -0.01 of its potential returns per unit of risk. Brown Forman is currently generating about -0.07 per unit of risk. If you would invest 453.00 in Willamette Valley Vineyards on October 21, 2024 and sell it today you would lose (113.00) from holding Willamette Valley Vineyards or give up 24.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Willamette Valley Vineyards vs. Brown Forman
Performance |
| Timeline |
| Willamette Valley |
| Brown Forman |
Willamette Valley and Brown Forman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Willamette Valley and Brown Forman
The main advantage of trading using opposite Willamette Valley and Brown Forman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley position performs unexpectedly, Brown Forman 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 Brown Forman will offset losses from the drop in Brown Forman's long position.| Willamette Valley vs. Naked Wines plc | Willamette Valley vs. Pernod Ricard SA | Willamette Valley vs. Brown Forman | Willamette Valley vs. Treasury Wine Estates |
| Brown Forman vs. MGP Ingredients | Brown Forman vs. Diageo PLC ADR | Brown Forman vs. Constellation Brands Class | Brown Forman vs. Pernod Ricard SA |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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