Correlation Between MT Bank and Naked Wines

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

By analyzing existing cross correlation between MT Bank Corp and Naked Wines plc, you can compare the effects of market volatilities on MT Bank and Naked Wines 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 MT Bank with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT Bank and Naked Wines.

Diversification Opportunities for MT Bank and Naked Wines

-0.12

Correlation Coefficient

MT Bank  Naked Wines

Good diversification

The 3 months correlation between 0JW2 and Naked is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank Corp and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines plc and MT Bank 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 MT Bank Corp are associated (or correlated) with Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of MT Bank i.e., MT Bank and Naked Wines go up and down completely randomly.

Pair Corralation between MT Bank and Naked Wines

Assuming the 90 days trading horizon MT Bank Corp is expected to generate 0.79 times more return on investment than Naked Wines. However, MT Bank Corp is 1.27 times less risky than Naked Wines. It trades about 0.14 of its potential returns per unit of risk. Naked Wines plc is currently generating about 0.02 per unit of risk. If you would invest  17,099  in MT Bank Corp on September 14, 2024 and sell it today you would earn a total of  2,932  from holding MT Bank Corp or generate 17.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

MT Bank Corp  vs.  Naked Wines plc

MT Bank Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MT Bank Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MT Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Naked Wines plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Naked Wines is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MT Bank and Naked Wines

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

The idea behind MT Bank Corp and Naked Wines plc 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 Transaction History module to view history of all your transactions and understand their impact on performance.