Correlation Between BRIT AMER and NAKED WINES

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

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

Diversification Opportunities for BRIT AMER and NAKED WINES

0.31

Correlation Coefficient

BRIT AMER  NAKED WINES

Weak diversification

The 3 months correlation between BRIT and NAKED is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO 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 BRIT AMER 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 BRIT AMER TOBACCO 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 BRIT AMER i.e., BRIT AMER and NAKED WINES go up and down completely randomly.

Pair Corralation between BRIT AMER and NAKED WINES

Assuming the 90 days trading horizon BRIT AMER TOBACCO is expected to generate 0.34 times more return on investment than NAKED WINES. However, BRIT AMER TOBACCO is 2.98 times less risky than NAKED WINES. It trades about 0.1 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  3,455  in BRIT AMER TOBACCO on December 21, 2024 and sell it today you would earn a total of  331.00  from holding BRIT AMER TOBACCO or generate 9.58% return on investment over 90 days.

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

BRIT AMER TOBACCO  vs.  NAKED WINES PLC

BRIT AMER TOBACCO

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BRIT AMER TOBACCO are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BRIT AMER may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NAKED WINES PLC

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NAKED WINES PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NAKED WINES may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BRIT AMER and NAKED WINES

The main advantage of trading using opposite BRIT AMER and NAKED WINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRIT AMER 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 BRIT AMER TOBACCO 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..