Correlation Between NAKED WINES and COMINTL BANK

Can any of the company-specific risk be diversified away by investing in both NAKED WINES and COMINTL BANK 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 COMINTL BANK 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 COMINTL BANK ADR1, you can compare the effects of market volatilities on NAKED WINES and COMINTL BANK 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 COMINTL BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAKED WINES and COMINTL BANK.

Diversification Opportunities for NAKED WINES and COMINTL BANK

0.08

Correlation Coefficient

NAKED WINES  COMINTL BANK

Significant diversification

The 3 months correlation between NAKED and COMINTL is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding NAKED WINES PLC and COMINTL BANK ADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMINTL BANK ADR1 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 COMINTL BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMINTL BANK ADR1 has no effect on the direction of NAKED WINES i.e., NAKED WINES and COMINTL BANK go up and down completely randomly.

Pair Corralation between NAKED WINES and COMINTL BANK

Assuming the 90 days horizon NAKED WINES PLC is expected to generate 3.09 times more return on investment than COMINTL BANK. However, NAKED WINES is 3.09 times more volatile than COMINTL BANK ADR1. It trades about 0.06 of its potential returns per unit of risk. COMINTL BANK ADR1 is currently generating about -0.05 per unit of risk. If you would invest  54.00  in NAKED WINES PLC on December 23, 2024 and sell it today you would earn a total of  6.00  from holding NAKED WINES PLC or generate 11.11% return on investment over 90 days.

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

NAKED WINES PLC  vs.  COMINTL BANK ADR1

NAKED WINES PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NAKED WINES PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, NAKED WINES reported solid returns over the last few months and may actually be approaching a breakup point.

COMINTL BANK ADR1

Risk-Adjusted Performance

Very Weak

Over the last 90 days COMINTL BANK ADR1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, COMINTL BANK 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 COMINTL BANK

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

The idea behind NAKED WINES PLC and COMINTL BANK ADR1 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.