Correlation Between Naked Wines and CERo Therapeutics

Can any of the company-specific risk be diversified away by investing in both Naked Wines and CERo Therapeutics 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 CERo Therapeutics 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 CERo Therapeutics Holdings, you can compare the effects of market volatilities on Naked Wines and CERo Therapeutics 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 CERo Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and CERo Therapeutics.

Diversification Opportunities for Naked Wines and CERo Therapeutics

-0.32

Correlation Coefficient

Naked Wines  CERo Therapeutics

Very good diversification

The 3 months correlation between Naked and CERo is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and CERo Therapeutics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CERo Therapeutics 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 CERo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CERo Therapeutics has no effect on the direction of Naked Wines i.e., Naked Wines and CERo Therapeutics go up and down completely randomly.

Pair Corralation between Naked Wines and CERo Therapeutics

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the CERo Therapeutics. But the pink sheet apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 3.51 times less risky than CERo Therapeutics. The pink sheet trades about 0.0 of its potential returns per unit of risk. The CERo Therapeutics Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.90  in CERo Therapeutics Holdings on December 20, 2024 and sell it today you would earn a total of  0.34  from holding CERo Therapeutics Holdings or generate 37.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.55%
Values	Daily Returns

Naked Wines plc  vs.  CERo Therapeutics Holdings

Naked Wines plc

Risk-Adjusted Performance

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 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.

CERo Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CERo Therapeutics Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, CERo Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Naked Wines and CERo Therapeutics

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

The idea behind Naked Wines plc and CERo Therapeutics Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.