Correlation Between Virgin Wines and Third Point

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

By analyzing existing cross correlation between Virgin Wines UK and Third Point Investors, you can compare the effects of market volatilities on Virgin Wines and Third Point 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 Virgin Wines with a short position of Third Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virgin Wines and Third Point.

Diversification Opportunities for Virgin Wines and Third Point

-0.17

Correlation Coefficient

Virgin Wines  Third Point

Good diversification

The 3 months correlation between Virgin and Third is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Wines UK and Third Point Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Point Investors and Virgin Wines 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 Virgin Wines UK are associated (or correlated) with Third Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Point Investors has no effect on the direction of Virgin Wines i.e., Virgin Wines and Third Point go up and down completely randomly.

Pair Corralation between Virgin Wines and Third Point

Assuming the 90 days trading horizon Virgin Wines UK is expected to generate 2.07 times more return on investment than Third Point. However, Virgin Wines is 2.07 times more volatile than Third Point Investors. It trades about 0.21 of its potential returns per unit of risk. Third Point Investors is currently generating about 0.16 per unit of risk. If you would invest  4,420  in Virgin Wines UK on April 25, 2025 and sell it today you would earn a total of  1,680  from holding Virgin Wines UK or generate 38.01% return on investment over 90 days.

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

Virgin Wines UK  vs.  Third Point Investors

Virgin Wines UK

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Wines UK are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Virgin Wines unveiled solid returns over the last few months and may actually be approaching a breakup point.

Third Point Investors

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Third Point Investors are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Third Point unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Virgin Wines and Third Point

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

The idea behind Virgin Wines UK and Third Point Investors 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.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.