Correlation Between NAKED WINES and ANDREW PELLER

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

Diversification Opportunities for NAKED WINES and ANDREW PELLER

0.5

Correlation Coefficient

NAKED WINES  ANDREW PELLER

Very weak diversification

The 3 months correlation between NAKED and ANDREW is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding NAKED WINES PLC and ANDREW PELLER LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANDREW PELLER LTD 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 ANDREW PELLER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANDREW PELLER LTD has no effect on the direction of NAKED WINES i.e., NAKED WINES and ANDREW PELLER go up and down completely randomly.

Pair Corralation between NAKED WINES and ANDREW PELLER

Assuming the 90 days horizon NAKED WINES PLC is expected to under-perform the ANDREW PELLER. In addition to that, NAKED WINES is 1.33 times more volatile than ANDREW PELLER LTD. It trades about -0.1 of its total potential returns per unit of risk. ANDREW PELLER LTD is currently generating about -0.08 per unit of volatility. If you would invest  284.00  in ANDREW PELLER LTD on September 23, 2024 and sell it today you would lose (24.00) from holding ANDREW PELLER LTD or give up 8.45% of portfolio value over 90 days.

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

NAKED WINES PLC  vs.  ANDREW PELLER LTD

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

ANDREW PELLER LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ANDREW PELLER LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ANDREW PELLER is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NAKED WINES and ANDREW PELLER

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

The idea behind NAKED WINES PLC and ANDREW PELLER LTD 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.