Correlation Between Naked Wines and Intelligent Bio

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

Diversification Opportunities for Naked Wines and Intelligent Bio

0.46

Correlation Coefficient

Naked Wines  Intelligent Bio

Very weak diversification

The 3 months correlation between Naked and Intelligent is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Intelligent Bio Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intelligent Bio Solutions 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 Intelligent Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intelligent Bio Solutions has no effect on the direction of Naked Wines i.e., Naked Wines and Intelligent Bio go up and down completely randomly.

Pair Corralation between Naked Wines and Intelligent Bio

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the Intelligent Bio. But the pink sheet apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 2.69 times less risky than Intelligent Bio. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Intelligent Bio Solutions is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,288  in Intelligent Bio Solutions on October 11, 2024 and sell it today you would lose (6,147) from holding Intelligent Bio Solutions or give up 97.76% of portfolio value over 90 days.

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

Naked Wines plc  vs.  Intelligent Bio Solutions

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.

Intelligent Bio Solutions

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Intelligent Bio Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Intelligent Bio is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Naked Wines and Intelligent Bio

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

The idea behind Naked Wines plc and Intelligent Bio Solutions 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.