Correlation Between Naked Wines and Commonwealth Bank

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

Diversification Opportunities for Naked Wines and Commonwealth Bank

0.67

Correlation Coefficient

Naked Wines  Commonwealth Bank

Poor diversification

The 3 months correlation between Naked and Commonwealth is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank 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 Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of Naked Wines i.e., Naked Wines and Commonwealth Bank go up and down completely randomly.

Pair Corralation between Naked Wines and Commonwealth Bank

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the Commonwealth Bank. In addition to that, Naked Wines is 5.1 times more volatile than Commonwealth Bank of. It trades about 0.0 of its total potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.06 per unit of volatility. If you would invest  6,994  in Commonwealth Bank of on October 11, 2024 and sell it today you would earn a total of  2,796  from holding Commonwealth Bank of or generate 39.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Naked Wines plc  vs.  Commonwealth Bank of

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.

Commonwealth Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Commonwealth Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Naked Wines and Commonwealth Bank

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

The idea behind Naked Wines plc and Commonwealth Bank of 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.

Check out your portfolio center.

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..