Correlation Between Naked Wines and LOWES

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

Diversification Opportunities for Naked Wines and LOWES

0.13

Correlation Coefficient

Naked Wines  LOWES

Average diversification

The 3 months correlation between Naked and LOWES is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and LOWES PANIES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOWES PANIES INC 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 LOWES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOWES PANIES INC has no effect on the direction of Naked Wines i.e., Naked Wines and LOWES go up and down completely randomly.

Pair Corralation between Naked Wines and LOWES

Assuming the 90 days horizon Naked Wines plc is expected to generate 27.74 times more return on investment than LOWES. However, Naked Wines is 27.74 times more volatile than LOWES PANIES INC. It trades about 0.11 of its potential returns per unit of risk. LOWES PANIES INC is currently generating about 0.13 per unit of risk. If you would invest  255.00  in Naked Wines plc on December 28, 2024 and sell it today you would earn a total of  154.00  from holding Naked Wines plc or generate 60.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Naked Wines plc  vs.  LOWES PANIES INC

Naked Wines plc

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Naked Wines showed solid returns over the last few months and may actually be approaching a breakup point.

LOWES PANIES INC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LOWES PANIES INC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, LOWES 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 LOWES

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

The idea behind Naked Wines plc and LOWES PANIES INC 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.