Correlation Between Naked Wines and Summit Environmental

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

Diversification Opportunities for Naked Wines and Summit Environmental

0.0

Correlation Coefficient

Naked Wines  Summit Environmental

Pay attention - limited upside

The 3 months correlation between Naked and Summit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Summit Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Environmental 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 Summit Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Environmental has no effect on the direction of Naked Wines i.e., Naked Wines and Summit Environmental go up and down completely randomly.

Pair Corralation between Naked Wines and Summit Environmental

If you would invest  0.01  in Summit Environmental on September 18, 2024 and sell it today you would earn a total of  0.00  from holding Summit Environmental or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Naked Wines plc  vs.  Summit Environmental

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.

Summit Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Naked Wines and Summit Environmental

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

The idea behind Naked Wines plc and Summit Environmental 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.