Correlation Between Naked Wines and Nexxen International

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

Diversification Opportunities for Naked Wines and Nexxen International

-0.01

Correlation Coefficient

Naked Wines  Nexxen International

Good diversification

The 3 months correlation between Naked and Nexxen is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Nexxen International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexxen International 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 Nexxen International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexxen International has no effect on the direction of Naked Wines i.e., Naked Wines and Nexxen International go up and down completely randomly.

Pair Corralation between Naked Wines and Nexxen International

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the Nexxen International. In addition to that, Naked Wines is 2.14 times more volatile than Nexxen International. It trades about 0.0 of its total potential returns per unit of risk. Nexxen International is currently generating about 0.04 per unit of volatility. If you would invest  767.00  in Nexxen International on October 10, 2024 and sell it today you would earn a total of  307.00  from holding Nexxen International or generate 40.03% return on investment over 90 days.

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

Naked Wines plc  vs.  Nexxen International

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.

Nexxen International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nexxen International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Nexxen International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Naked Wines and Nexxen International

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

The idea behind Naked Wines plc and Nexxen International 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.