Correlation Between NAKED WINES and Sumitomo Rubber

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

Diversification Opportunities for NAKED WINES and Sumitomo Rubber

-0.62

Correlation Coefficient

NAKED WINES  Sumitomo Rubber

Excellent diversification

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

Pair Corralation between NAKED WINES and Sumitomo Rubber

Assuming the 90 days horizon NAKED WINES PLC is expected to under-perform the Sumitomo Rubber. In addition to that, NAKED WINES is 1.47 times more volatile than Sumitomo Rubber Industries. It trades about -0.02 of its total potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about 0.1 per unit of volatility. If you would invest  955.00  in Sumitomo Rubber Industries on September 20, 2024 and sell it today you would earn a total of  125.00  from holding Sumitomo Rubber Industries or generate 13.09% return on investment over 90 days.

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

NAKED WINES PLC  vs.  Sumitomo Rubber Industries

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. Despite nearly stable basic indicators, NAKED WINES is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sumitomo Rubber Indu

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sumitomo Rubber reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NAKED WINES and Sumitomo Rubber

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

The idea behind NAKED WINES PLC and Sumitomo Rubber Industries 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.