Correlation Between G5 Entertainment and Naked Wines

Can any of the company-specific risk be diversified away by investing in both G5 Entertainment 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 G5 Entertainment and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G5 Entertainment AB and Naked Wines plc, you can compare the effects of market volatilities on G5 Entertainment 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 G5 Entertainment with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of G5 Entertainment and Naked Wines.

Diversification Opportunities for G5 Entertainment and Naked Wines

0.74

Correlation Coefficient

G5 Entertainment  Naked Wines

Poor diversification

The 3 months correlation between 0QUS and Naked is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding G5 Entertainment AB 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 G5 Entertainment 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 G5 Entertainment AB 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 G5 Entertainment i.e., G5 Entertainment and Naked Wines go up and down completely randomly.

Pair Corralation between G5 Entertainment and Naked Wines

Assuming the 90 days trading horizon G5 Entertainment AB is expected to generate 0.57 times more return on investment than Naked Wines. However, G5 Entertainment AB is 1.74 times less risky than Naked Wines. It trades about 0.12 of its potential returns per unit of risk. Naked Wines plc is currently generating about 0.06 per unit of risk. If you would invest  10,700  in G5 Entertainment AB on December 22, 2024 and sell it today you would earn a total of  2,080  from holding G5 Entertainment AB or generate 19.44% return on investment over 90 days.

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

G5 Entertainment AB  vs.  Naked Wines plc

G5 Entertainment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in G5 Entertainment AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, G5 Entertainment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Naked Wines plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Naked Wines unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with G5 Entertainment and Naked Wines

The main advantage of trading using opposite G5 Entertainment and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G5 Entertainment 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 G5 Entertainment AB 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.