Correlation Between CSL and Treasury Wine

Can any of the company-specific risk be diversified away by investing in both CSL 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 CSL and Treasury Wine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CSL Limited and Treasury Wine Estates, you can compare the effects of market volatilities on CSL 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 CSL with a short position of Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and Treasury Wine.

Diversification Opportunities for CSL and Treasury Wine

0.42

Correlation Coefficient

CSL  Treasury Wine

Very weak diversification

The 3 months correlation between CSL and Treasury is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding CSL Limited 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 CSL 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 CSL Limited 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 CSL i.e., CSL and Treasury Wine go up and down completely randomly.

Pair Corralation between CSL and Treasury Wine

Assuming the 90 days horizon CSL Limited is expected to generate 1.04 times more return on investment than Treasury Wine. However, CSL is 1.04 times more volatile than Treasury Wine Estates. It trades about 0.08 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about -0.06 per unit of risk. If you would invest  13,272  in CSL Limited on April 21, 2025 and sell it today you would earn a total of  1,020  from holding CSL Limited or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CSL Limited  vs.  Treasury Wine Estates

CSL Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CSL Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CSL may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Treasury Wine Estates

Risk-Adjusted Performance

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Treasury Wine is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CSL and Treasury Wine

The main advantage of trading using opposite CSL and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL 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.

The idea behind CSL Limited and Treasury Wine Estates 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.