Correlation Between CPU SOFTWAREHOUSE and NAKED WINES

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

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

Diversification Opportunities for CPU SOFTWAREHOUSE and NAKED WINES

0.2

Correlation Coefficient

CPU SOFTWAREHOUSE  NAKED WINES

Modest diversification

The 3 months correlation between CPU and NAKED is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE i.e., CPU SOFTWAREHOUSE and NAKED WINES go up and down completely randomly.

Pair Corralation between CPU SOFTWAREHOUSE and NAKED WINES

Assuming the 90 days trading horizon CPU SOFTWAREHOUSE is expected to generate 1.32 times more return on investment than NAKED WINES. However, CPU SOFTWAREHOUSE is 1.32 times more volatile than NAKED WINES PLC. It trades about 0.01 of its potential returns per unit of risk. NAKED WINES PLC is currently generating about -0.08 per unit of risk. If you would invest  94.00  in CPU SOFTWAREHOUSE on October 11, 2024 and sell it today you would lose (4.00) from holding CPU SOFTWAREHOUSE or give up 4.26% of portfolio value over 90 days.

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

CPU SOFTWAREHOUSE  vs.  NAKED WINES PLC

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CPU SOFTWAREHOUSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CPU SOFTWAREHOUSE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 CPU SOFTWAREHOUSE and NAKED WINES

The main advantage of trading using opposite CPU SOFTWAREHOUSE and NAKED WINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .