Correlation Between Naked Wines and Brandywine Realty

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

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

Diversification Opportunities for Naked Wines and Brandywine Realty

-0.31

Correlation Coefficient

Naked Wines  Brandywine Realty

Very good diversification

The 3 months correlation between Naked and Brandywine is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Brandywine Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandywine Realty Trust and Naked Wines 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 Naked Wines plc are associated (or correlated) with Brandywine Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandywine Realty Trust has no effect on the direction of Naked Wines i.e., Naked Wines and Brandywine Realty go up and down completely randomly.

Pair Corralation between Naked Wines and Brandywine Realty

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the Brandywine Realty. But the pink sheet apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 1.92 times less risky than Brandywine Realty. The pink sheet trades about -0.21 of its potential returns per unit of risk. The Brandywine Realty Trust is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  543.00  in Brandywine Realty Trust on October 11, 2024 and sell it today you would lose (28.00) from holding Brandywine Realty Trust or give up 5.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Naked Wines plc  vs.  Brandywine Realty Trust

Naked Wines plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Naked Wines is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brandywine Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brandywine Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Brandywine Realty is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Naked Wines and Brandywine Realty

The main advantage of trading using opposite Naked Wines and Brandywine Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Brandywine Realty 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 Brandywine Realty will offset losses from the drop in Brandywine Realty's long position.

The idea behind Naked Wines plc and Brandywine Realty Trust 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.