Correlation Between Brandywine Realty and Naked Wines

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

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

Diversification Opportunities for Brandywine Realty and Naked Wines

0.05

Correlation Coefficient

Brandywine Realty  Naked Wines

Significant diversification

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

Pair Corralation between Brandywine Realty and Naked Wines

Considering the 90-day investment horizon Brandywine Realty Trust is expected to generate 0.4 times more return on investment than Naked Wines. However, Brandywine Realty Trust is 2.5 times less risky than Naked Wines. It trades about 0.02 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  516.00  in Brandywine Realty Trust on October 26, 2024 and sell it today you would earn a total of  19.00  from holding Brandywine Realty Trust or generate 3.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Brandywine Realty Trust  vs.  Naked Wines plc

Brandywine Realty Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brandywine Realty Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Brandywine Realty is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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 Brandywine Realty and Naked Wines

The main advantage of trading using opposite Brandywine Realty and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brandywine Realty 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 Brandywine Realty 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.