Correlation Between Naked Wines and International Paper

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

Diversification Opportunities for Naked Wines and International Paper

0.31

Correlation Coefficient

Naked Wines  International Paper

Weak diversification

The 3 months correlation between Naked and International is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper 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 International Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Paper has no effect on the direction of Naked Wines i.e., Naked Wines and International Paper go up and down completely randomly.

Pair Corralation between Naked Wines and International Paper

If you would invest  252.00  in Naked Wines plc on September 26, 2024 and sell it today you would earn a total of  3.00  from holding Naked Wines plc or generate 1.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	33.33%
Values	Daily Returns

Naked Wines plc  vs.  International Paper

Naked Wines plc

Risk-Adjusted Performance

0 of 100

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.

International Paper

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days International Paper has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, International Paper is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Naked Wines and International Paper

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

The idea behind Naked Wines plc and International Paper 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.