Correlation Between NAKED WINES and Daiwa House

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

Diversification Opportunities for NAKED WINES and Daiwa House

-0.69

Correlation Coefficient

NAKED WINES  Daiwa House

Excellent diversification

The 3 months correlation between NAKED and Daiwa is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding NAKED WINES PLC and Daiwa House Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa House Industry 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 Daiwa House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa House Industry has no effect on the direction of NAKED WINES i.e., NAKED WINES and Daiwa House go up and down completely randomly.

Pair Corralation between NAKED WINES and Daiwa House

Assuming the 90 days horizon NAKED WINES PLC is expected to under-perform the Daiwa House. In addition to that, NAKED WINES is 2.2 times more volatile than Daiwa House Industry. It trades about -0.24 of its total potential returns per unit of risk. Daiwa House Industry is currently generating about -0.1 per unit of volatility. If you would invest  3,040  in Daiwa House Industry on October 12, 2024 and sell it today you would lose (100.00) from holding Daiwa House Industry or give up 3.29% of portfolio value over 90 days.

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

NAKED WINES PLC  vs.  Daiwa House Industry

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 uncertain 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.

Daiwa House Industry

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with NAKED WINES and Daiwa House

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

The idea behind NAKED WINES PLC and Daiwa House Industry 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.