Correlation Between Naked Wines and Iconic Brands

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

Diversification Opportunities for Naked Wines and Iconic Brands

0.0

Correlation Coefficient

Naked Wines  Iconic Brands

Pay attention - limited upside

The 3 months correlation between Naked and Iconic is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Iconic Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iconic Brands 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 Iconic Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iconic Brands has no effect on the direction of Naked Wines i.e., Naked Wines and Iconic Brands go up and down completely randomly.

Pair Corralation between Naked Wines and Iconic Brands

If you would invest  271.00  in Naked Wines plc on November 28, 2024 and sell it today you would earn a total of  6.00  from holding Naked Wines plc or generate 2.21% return on investment over 90 days.

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

Naked Wines plc  vs.  Iconic Brands

Naked Wines plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Naked Wines may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Iconic Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iconic Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iconic Brands 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 Iconic Brands

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

The idea behind Naked Wines plc and Iconic Brands 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.