Correlation Between NAKED WINES and BG Foods

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

Diversification Opportunities for NAKED WINES and BG Foods

0.37

Correlation Coefficient

NAKED WINES  BG Foods

Weak diversification

The 3 months correlation between NAKED and DHR is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NAKED WINES PLC and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of NAKED WINES i.e., NAKED WINES and BG Foods go up and down completely randomly.

Pair Corralation between NAKED WINES and BG Foods

Assuming the 90 days horizon NAKED WINES PLC is expected to generate 1.77 times more return on investment than BG Foods. However, NAKED WINES is 1.77 times more volatile than BG Foods. It trades about 0.04 of its potential returns per unit of risk. BG Foods is currently generating about -0.12 per unit of risk. If you would invest  53.00  in NAKED WINES PLC on October 26, 2024 and sell it today you would earn a total of  1.00  from holding NAKED WINES PLC or generate 1.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

NAKED WINES PLC  vs.  BG Foods

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BG Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BG Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with NAKED WINES and BG Foods

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

The idea behind NAKED WINES PLC and BG Foods 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.