Correlation Between NAKED WINES and VIRGIN WINES
Can any of the company-specific risk be diversified away by investing in both NAKED WINES and VIRGIN WINES 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 VIRGIN WINES 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 VIRGIN WINES UK, you can compare the effects of market volatilities on NAKED WINES and VIRGIN WINES 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 VIRGIN WINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAKED WINES and VIRGIN WINES.
Diversification Opportunities for NAKED WINES and VIRGIN WINES
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NAKED and VIRGIN is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding NAKED WINES PLC and VIRGIN WINES UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIRGIN WINES UK 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 VIRGIN WINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIRGIN WINES UK has no effect on the direction of NAKED WINES i.e., NAKED WINES and VIRGIN WINES go up and down completely randomly.
Pair Corralation between NAKED WINES and VIRGIN WINES
Assuming the 90 days horizon NAKED WINES PLC is expected to generate 0.56 times more return on investment than VIRGIN WINES. However, NAKED WINES PLC is 1.79 times less risky than VIRGIN WINES. It trades about 0.1 of its potential returns per unit of risk. VIRGIN WINES UK is currently generating about -0.17 per unit of risk. If you would invest 57.00 in NAKED WINES PLC on November 28, 2024 and sell it today you would earn a total of 12.00 from holding NAKED WINES PLC or generate 21.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
NAKED WINES PLC vs. VIRGIN WINES UK
Performance |
Timeline |
NAKED WINES PLC |
VIRGIN WINES UK |
NAKED WINES and VIRGIN WINES Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NAKED WINES and VIRGIN WINES
The main advantage of trading using opposite NAKED WINES and VIRGIN WINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NAKED WINES position performs unexpectedly, VIRGIN WINES 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 VIRGIN WINES will offset losses from the drop in VIRGIN WINES's long position.NAKED WINES vs. H2O Retailing | NAKED WINES vs. Molina Healthcare | NAKED WINES vs. Acadia Healthcare Co | NAKED WINES vs. CARDINAL HEALTH |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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