Correlation Between Allianz Technology and Naked Wines

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

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

Diversification Opportunities for Allianz Technology and Naked Wines

0.05

Correlation Coefficient

Allianz Technology  Naked Wines

Significant diversification

The 3 months correlation between Allianz and Naked is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Allianz Technology Trust 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 Allianz Technology 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 Allianz Technology Trust 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 Allianz Technology i.e., Allianz Technology and Naked Wines go up and down completely randomly.

Pair Corralation between Allianz Technology and Naked Wines

Assuming the 90 days trading horizon Allianz Technology Trust is expected to generate 0.68 times more return on investment than Naked Wines. However, Allianz Technology Trust is 1.46 times less risky than Naked Wines. It trades about 0.16 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  33,900  in Allianz Technology Trust on September 3, 2024 and sell it today you would earn a total of  5,850  from holding Allianz Technology Trust or generate 17.26% return on investment over 90 days.

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

Allianz Technology Trust  vs.  Naked Wines plc

Allianz Technology Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allianz Technology Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Allianz Technology exhibited 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 comparatively stable basic indicators, Naked Wines is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Allianz Technology and Naked Wines

The main advantage of trading using opposite Allianz Technology and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allianz Technology 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 Allianz Technology Trust 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.