Correlation Between ITALIAN WINE and DAIRY FARM

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

By analyzing existing cross correlation between ITALIAN WINE BRANDS and DAIRY FARM INTL, you can compare the effects of market volatilities on ITALIAN WINE and DAIRY FARM 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 ITALIAN WINE with a short position of DAIRY FARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITALIAN WINE and DAIRY FARM.

Diversification Opportunities for ITALIAN WINE and DAIRY FARM

-0.04

Correlation Coefficient

ITALIAN WINE  DAIRY FARM

Good diversification

The 3 months correlation between ITALIAN and DAIRY is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and DAIRY FARM INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIRY FARM INTL and ITALIAN 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 ITALIAN WINE BRANDS are associated (or correlated) with DAIRY FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIRY FARM INTL has no effect on the direction of ITALIAN WINE i.e., ITALIAN WINE and DAIRY FARM go up and down completely randomly.

Pair Corralation between ITALIAN WINE and DAIRY FARM

Assuming the 90 days horizon ITALIAN WINE is expected to generate 50.0 times less return on investment than DAIRY FARM. But when comparing it to its historical volatility, ITALIAN WINE BRANDS is 2.22 times less risky than DAIRY FARM. It trades about 0.01 of its potential returns per unit of risk. DAIRY FARM INTL is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  216.00  in DAIRY FARM INTL on April 25, 2025 and sell it today you would earn a total of  68.00  from holding DAIRY FARM INTL or generate 31.48% return on investment over 90 days.

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

ITALIAN WINE BRANDS  vs.  DAIRY FARM INTL

ITALIAN WINE BRANDS

Risk-Adjusted Performance

Weak

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

DAIRY FARM INTL

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DAIRY FARM INTL are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DAIRY FARM unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITALIAN WINE and DAIRY FARM

The main advantage of trading using opposite ITALIAN WINE and DAIRY FARM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE position performs unexpectedly, DAIRY FARM 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 DAIRY FARM will offset losses from the drop in DAIRY FARM's long position.

The idea behind ITALIAN WINE BRANDS and DAIRY FARM INTL 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..