Correlation Between NAKED WINES and FAST RETAIL

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

Diversification Opportunities for NAKED WINES and FAST RETAIL

-0.06

Correlation Coefficient

NAKED WINES  FAST RETAIL

Good diversification

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

Pair Corralation between NAKED WINES and FAST RETAIL

Assuming the 90 days horizon NAKED WINES PLC is expected to under-perform the FAST RETAIL. In addition to that, NAKED WINES is 1.96 times more volatile than FAST RETAIL ADR. It trades about -0.12 of its total potential returns per unit of risk. FAST RETAIL ADR is currently generating about 0.08 per unit of volatility. If you would invest  3,120  in FAST RETAIL ADR on September 27, 2024 and sell it today you would earn a total of  80.00  from holding FAST RETAIL ADR or generate 2.56% return on investment over 90 days.

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

NAKED WINES PLC  vs.  FAST RETAIL ADR

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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

FAST RETAIL ADR

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with NAKED WINES and FAST RETAIL

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

The idea behind NAKED WINES PLC and FAST RETAIL ADR 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.