Correlation Between NAKED WINES and Wayside Technology

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

Diversification Opportunities for NAKED WINES and Wayside Technology

-0.57

Correlation Coefficient

NAKED WINES  Wayside Technology

Excellent diversification

The 3 months correlation between NAKED and Wayside is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding NAKED WINES PLC and Wayside Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayside Technology 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 Wayside Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayside Technology has no effect on the direction of NAKED WINES i.e., NAKED WINES and Wayside Technology go up and down completely randomly.

Pair Corralation between NAKED WINES and Wayside Technology

Assuming the 90 days horizon NAKED WINES PLC is expected to under-perform the Wayside Technology. But the stock apears to be less risky and, when comparing its historical volatility, NAKED WINES PLC is 1.03 times less risky than Wayside Technology. The stock trades about -0.09 of its potential returns per unit of risk. The Wayside Technology Group is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  12,800  in Wayside Technology Group on October 3, 2024 and sell it today you would lose (800.00) from holding Wayside Technology Group or give up 6.25% of portfolio value over 90 days.

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

NAKED WINES PLC  vs.  Wayside Technology Group

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.

Wayside Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wayside Technology Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wayside Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NAKED WINES and Wayside Technology

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

The idea behind NAKED WINES PLC and Wayside Technology Group 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.