Correlation Between Naked Wines and XBP Europe

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

Diversification Opportunities for Naked Wines and XBP Europe

0.39

Correlation Coefficient

Naked Wines  XBP Europe

Weak diversification

The 3 months correlation between Naked and XBP is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and XBP Europe Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XBP Europe Holdings 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 XBP Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XBP Europe Holdings has no effect on the direction of Naked Wines i.e., Naked Wines and XBP Europe go up and down completely randomly.

Pair Corralation between Naked Wines and XBP Europe

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the XBP Europe. But the pink sheet apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 3.91 times less risky than XBP Europe. The pink sheet trades about 0.0 of its potential returns per unit of risk. The XBP Europe Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4.00  in XBP Europe Holdings on December 19, 2024 and sell it today you would lose (1.48) from holding XBP Europe Holdings or give up 37.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	79.03%
Values	Daily Returns

Naked Wines plc  vs.  XBP Europe Holdings

Naked Wines plc

Risk-Adjusted Performance

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.

XBP Europe Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in XBP Europe Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, XBP Europe showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Naked Wines and XBP Europe

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

The idea behind Naked Wines plc and XBP Europe Holdings 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.