Correlation Between NAKED WINES and MAGNUM DCORP
Can any of the company-specific risk be diversified away by investing in both NAKED WINES and MAGNUM DCORP 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 MAGNUM DCORP 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 MAGNUM DCORP INC, you can compare the effects of market volatilities on NAKED WINES and MAGNUM DCORP 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 MAGNUM DCORP. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAKED WINES and MAGNUM DCORP.
Diversification Opportunities for NAKED WINES and MAGNUM DCORP
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between NAKED and MAGNUM is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding NAKED WINES PLC and MAGNUM DCORP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAGNUM DCORP 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 MAGNUM DCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAGNUM DCORP INC has no effect on the direction of NAKED WINES i.e., NAKED WINES and MAGNUM DCORP go up and down completely randomly.
Pair Corralation between NAKED WINES and MAGNUM DCORP
Assuming the 90 days horizon NAKED WINES PLC is expected to under-perform the MAGNUM DCORP. But the stock apears to be less risky and, when comparing its historical volatility, NAKED WINES PLC is 9.67 times less risky than MAGNUM DCORP. The stock trades about -0.1 of its potential returns per unit of risk. The MAGNUM DCORP INC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5.25 in MAGNUM DCORP INC on September 22, 2024 and sell it today you would lose (2.04) from holding MAGNUM DCORP INC or give up 38.86% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
NAKED WINES PLC vs. MAGNUM DCORP INC
Performance |
Timeline |
NAKED WINES PLC |
MAGNUM DCORP INC |
NAKED WINES and MAGNUM DCORP Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NAKED WINES and MAGNUM DCORP
The main advantage of trading using opposite NAKED WINES and MAGNUM DCORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NAKED WINES position performs unexpectedly, MAGNUM DCORP 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 MAGNUM DCORP will offset losses from the drop in MAGNUM DCORP's long position.NAKED WINES vs. Diageo plc | NAKED WINES vs. Pernod Ricard SA | NAKED WINES vs. Hawesko Holding AG | NAKED WINES vs. ANDREW PELLER LTD |
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Check out your portfolio center.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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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