Correlation Between Naked Wines and ESH Acquisition

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

Diversification Opportunities for Naked Wines and ESH Acquisition

0.28

Correlation Coefficient

Naked Wines  ESH Acquisition

Modest diversification

The 3 months correlation between Naked and ESH is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and ESH Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESH Acquisition Corp 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 ESH Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESH Acquisition Corp has no effect on the direction of Naked Wines i.e., Naked Wines and ESH Acquisition go up and down completely randomly.

Pair Corralation between Naked Wines and ESH Acquisition

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the ESH Acquisition. In addition to that, Naked Wines is 7.22 times more volatile than ESH Acquisition Corp. It trades about 0.0 of its total potential returns per unit of risk. ESH Acquisition Corp is currently generating about 0.0 per unit of volatility. If you would invest  1,077  in ESH Acquisition Corp on December 27, 2024 and sell it today you would lose (1.00) from holding ESH Acquisition Corp or give up 0.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Naked Wines plc  vs.  ESH Acquisition Corp

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.

ESH Acquisition Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ESH Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Naked Wines and ESH Acquisition

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

The idea behind Naked Wines plc and ESH Acquisition Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.