Correlation Between Naked Wines and HUBBELL

Can any of the company-specific risk be diversified away by investing in both Naked Wines and HUBBELL 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 HUBBELL 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 HUBBELL INC 35, you can compare the effects of market volatilities on Naked Wines and HUBBELL 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 HUBBELL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and HUBBELL.

Diversification Opportunities for Naked Wines and HUBBELL

0.62

Correlation Coefficient

Naked Wines  HUBBELL

Poor diversification

The 3 months correlation between Naked and HUBBELL is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and HUBBELL INC 35 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUBBELL INC 35 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 HUBBELL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUBBELL INC 35 has no effect on the direction of Naked Wines i.e., Naked Wines and HUBBELL go up and down completely randomly.

Pair Corralation between Naked Wines and HUBBELL

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the HUBBELL. In addition to that, Naked Wines is 7.51 times more volatile than HUBBELL INC 35. It trades about -0.11 of its total potential returns per unit of risk. HUBBELL INC 35 is currently generating about 0.01 per unit of volatility. If you would invest  9,607  in HUBBELL INC 35 on October 26, 2024 and sell it today you would earn a total of  7.00  from holding HUBBELL INC 35 or generate 0.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Naked Wines plc  vs.  HUBBELL INC 35

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HUBBELL INC 35

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HUBBELL INC 35 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HUBBELL is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Naked Wines and HUBBELL

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

The idea behind Naked Wines plc and HUBBELL INC 35 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.