Correlation Between PT Ace and NAKED WINES

Can any of the company-specific risk be diversified away by investing in both PT Ace 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 PT Ace and NAKED WINES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Ace Hardware and NAKED WINES PLC, you can compare the effects of market volatilities on PT Ace 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 PT Ace with a short position of NAKED WINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Ace and NAKED WINES.

Diversification Opportunities for PT Ace and NAKED WINES

0.42

Correlation Coefficient

PT Ace  NAKED WINES

Very weak diversification

The 3 months correlation between 4AH1 and NAKED is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding PT Ace Hardware 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 PT Ace 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 PT Ace Hardware 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 PT Ace i.e., PT Ace and NAKED WINES go up and down completely randomly.

Pair Corralation between PT Ace and NAKED WINES

Assuming the 90 days trading horizon PT Ace Hardware is expected to generate 2.34 times more return on investment than NAKED WINES. However, PT Ace is 2.34 times more volatile than NAKED WINES PLC. 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  3.95  in PT Ace Hardware on September 27, 2024 and sell it today you would earn a total of  0.10  from holding PT Ace Hardware or generate 2.53% return on investment over 90 days.

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

PT Ace Hardware  vs.  NAKED WINES PLC

PT Ace Hardware

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Ace Hardware has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, PT Ace is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PT Ace and NAKED WINES

The main advantage of trading using opposite PT Ace and NAKED WINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Ace 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's long position.

The idea behind PT Ace Hardware 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.