Correlation Between NAKED WINES and MACOM Technology

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

Diversification Opportunities for NAKED WINES and MACOM Technology

-0.34

Correlation Coefficient

NAKED WINES  MACOM Technology

Very good diversification

The 3 months correlation between NAKED and MACOM is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding NAKED WINES PLC and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol 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 MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of NAKED WINES i.e., NAKED WINES and MACOM Technology go up and down completely randomly.

Pair Corralation between NAKED WINES and MACOM Technology

Assuming the 90 days horizon NAKED WINES PLC is expected to under-perform the MACOM Technology. But the stock apears to be less risky and, when comparing its historical volatility, NAKED WINES PLC is 1.0 times less risky than MACOM Technology. The stock trades about -0.09 of its potential returns per unit of risk. The MACOM Technology Solutions is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  10,500  in MACOM Technology Solutions on September 21, 2024 and sell it today you would earn a total of  2,300  from holding MACOM Technology Solutions or generate 21.9% return on investment over 90 days.

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

NAKED WINES PLC  vs.  MACOM Technology Solutions

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.

MACOM Technology Sol

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, MACOM Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NAKED WINES and MACOM Technology

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

The idea behind NAKED WINES PLC and MACOM Technology Solutions 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 CEOs Directory module to screen CEOs from public companies around the world.