Correlation Between NAKED WINES and Rai Way

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

Diversification Opportunities for NAKED WINES and Rai Way

0.06

Correlation Coefficient

NAKED WINES  Rai Way

Significant diversification

The 3 months correlation between NAKED and Rai is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding NAKED WINES PLC and Rai Way SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rai Way SpA 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 Rai Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rai Way SpA has no effect on the direction of NAKED WINES i.e., NAKED WINES and Rai Way go up and down completely randomly.

Pair Corralation between NAKED WINES and Rai Way

Assuming the 90 days horizon NAKED WINES PLC is expected to generate 2.68 times more return on investment than Rai Way. However, NAKED WINES is 2.68 times more volatile than Rai Way SpA. It trades about 0.11 of its potential returns per unit of risk. Rai Way SpA is currently generating about 0.08 per unit of risk. If you would invest  53.00  in NAKED WINES PLC on December 27, 2024 and sell it today you would earn a total of  16.00  from holding NAKED WINES PLC or generate 30.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

NAKED WINES PLC  vs.  Rai Way SpA

NAKED WINES PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NAKED WINES PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, NAKED WINES reported solid returns over the last few months and may actually be approaching a breakup point.

Rai Way SpA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rai Way SpA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Rai Way may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NAKED WINES and Rai Way

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

The idea behind NAKED WINES PLC and Rai Way SpA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.