Correlation Between AOYAMA TRADING and NAKED WINES

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

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

Diversification Opportunities for AOYAMA TRADING and NAKED WINES

-0.67

Correlation Coefficient

AOYAMA TRADING  NAKED WINES

Excellent diversification

The 3 months correlation between AOYAMA and NAKED is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding AOYAMA TRADING 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 AOYAMA TRADING 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 AOYAMA TRADING 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 AOYAMA TRADING i.e., AOYAMA TRADING and NAKED WINES go up and down completely randomly.

Pair Corralation between AOYAMA TRADING and NAKED WINES

Assuming the 90 days horizon AOYAMA TRADING is expected to generate 1.12 times more return on investment than NAKED WINES. However, AOYAMA TRADING is 1.12 times more volatile than NAKED WINES PLC. It trades about 0.08 of its potential returns per unit of risk. NAKED WINES PLC is currently generating about -0.03 per unit of risk. If you would invest  325.00  in AOYAMA TRADING on October 26, 2024 and sell it today you would earn a total of  995.00  from holding AOYAMA TRADING or generate 306.15% return on investment over 90 days.

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

AOYAMA TRADING  vs.  NAKED WINES PLC

AOYAMA TRADING

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AOYAMA TRADING are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, AOYAMA TRADING reported solid returns over the last few months and may actually be approaching a breakup point.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AOYAMA TRADING and NAKED WINES

The main advantage of trading using opposite AOYAMA TRADING and NAKED WINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AOYAMA TRADING 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 AOYAMA TRADING 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.