Correlation Between Naked Wines and Coca Cola

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

Diversification Opportunities for Naked Wines and Coca Cola

0.54

Correlation Coefficient

Naked Wines  Coca Cola

Very weak diversification

The 3 months correlation between Naked and Coca is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Naked Wines i.e., Naked Wines and Coca Cola go up and down completely randomly.

Pair Corralation between Naked Wines and Coca Cola

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the Coca Cola. In addition to that, Naked Wines is 4.64 times more volatile than The Coca Cola. It trades about 0.0 of its total potential returns per unit of risk. The Coca Cola is currently generating about 0.15 per unit of volatility. If you would invest  6,199  in The Coca Cola on December 27, 2024 and sell it today you would earn a total of  682.00  from holding The Coca Cola or generate 11.0% return on investment over 90 days.

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

Naked Wines plc  vs.  The Coca Cola

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.

Coca Cola

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Naked Wines and Coca Cola

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

The idea behind Naked Wines plc and The Coca Cola 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.