Correlation Between Treasury Wine and Australian Agricultural

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

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

Diversification Opportunities for Treasury Wine and Australian Agricultural

0.85

Correlation Coefficient

Treasury Wine  Australian Agricultural

Very poor diversification

The 3 months correlation between Treasury and Australian is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Treasury 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 Treasury Wine Estates are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Treasury Wine i.e., Treasury Wine and Australian Agricultural go up and down completely randomly.

Pair Corralation between Treasury Wine and Australian Agricultural

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the Australian Agricultural. But the stock apears to be less risky and, when comparing its historical volatility, Treasury Wine Estates is 1.28 times less risky than Australian Agricultural. The stock trades about -0.06 of its potential returns per unit of risk. The Australian Agricultural is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  77.00  in Australian Agricultural on April 22, 2025 and sell it today you would earn a total of  2.00  from holding Australian Agricultural or generate 2.6% return on investment over 90 days.

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

Treasury Wine Estates  vs.  Australian Agricultural

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Australian Agricultural

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Agricultural are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Australian Agricultural is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Treasury Wine and Australian Agricultural

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

The idea behind Treasury Wine Estates and Australian Agricultural 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.