Correlation Between Amer Sports, and Naked Wines

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

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

Diversification Opportunities for Amer Sports, and Naked Wines

-0.4

Correlation Coefficient

Amer Sports,  Naked Wines

Very good diversification

The 3 months correlation between Amer and Naked is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Amer Sports, 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 Amer Sports, 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 Amer Sports, 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 Amer Sports, i.e., Amer Sports, and Naked Wines go up and down completely randomly.

Pair Corralation between Amer Sports, and Naked Wines

Allowing for the 90-day total investment horizon Amer Sports, is expected to generate 0.45 times more return on investment than Naked Wines. However, Amer Sports, is 2.24 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 -0.01 per unit of risk. If you would invest  1,340  in Amer Sports, on October 21, 2024 and sell it today you would earn a total of  1,636  from holding Amer Sports, or generate 122.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	48.7%
Values	Daily Returns

Amer Sports,  vs.  Naked Wines plc

Amer Sports,

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amer Sports, are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Amer Sports, unveiled 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. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Amer Sports, and Naked Wines

The main advantage of trading using opposite Amer Sports, and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amer Sports, 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 Amer Sports, 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.