Correlation Between National Beverage and Naked Wines

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

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

Diversification Opportunities for National Beverage and Naked Wines

0.49

Correlation Coefficient

National Beverage  Naked Wines

Very weak diversification

The 3 months correlation between National and Naked is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage 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 National Beverage 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 National Beverage 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 National Beverage i.e., National Beverage and Naked Wines go up and down completely randomly.

Pair Corralation between National Beverage and Naked Wines

Assuming the 90 days trading horizon National Beverage Corp is expected to generate 0.59 times more return on investment than Naked Wines. However, National Beverage Corp is 1.69 times less risky than Naked Wines. It trades about -0.05 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.12 per unit of risk. If you would invest  4,532  in National Beverage Corp on October 23, 2024 and sell it today you would lose (255.00) from holding National Beverage Corp or give up 5.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

National Beverage Corp  vs.  Naked Wines plc

National Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Beverage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Naked Wines plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Naked Wines plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with National Beverage and Naked Wines

The main advantage of trading using opposite National Beverage and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage 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 National Beverage 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.