Correlation Between Naked Wines and PacifiCorp

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

Diversification Opportunities for Naked Wines and PacifiCorp

-0.19

Correlation Coefficient

Naked Wines  PacifiCorp

Good diversification

The 3 months correlation between Naked and PacifiCorp is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp 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 PacifiCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacifiCorp has no effect on the direction of Naked Wines i.e., Naked Wines and PacifiCorp go up and down completely randomly.

Pair Corralation between Naked Wines and PacifiCorp

Assuming the 90 days horizon Naked Wines is expected to generate 11.97 times less return on investment than PacifiCorp. In addition to that, Naked Wines is 1.14 times more volatile than PacifiCorp. It trades about 0.0 of its total potential returns per unit of risk. PacifiCorp is currently generating about 0.03 per unit of volatility. If you would invest  11,986  in PacifiCorp on September 14, 2024 and sell it today you would earn a total of  618.00  from holding PacifiCorp or generate 5.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.79%
Values	Daily Returns

Naked Wines plc  vs.  PacifiCorp

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.

PacifiCorp

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Naked Wines and PacifiCorp

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

The idea behind Naked Wines plc and PacifiCorp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.