Correlation Between NAKED WINES and RELX PLC

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

Diversification Opportunities for NAKED WINES and RELX PLC

-0.22

Correlation Coefficient

NAKED WINES  RELX PLC

Very good diversification

The 3 months correlation between NAKED and RELX is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding NAKED WINES PLC and RELX PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELX PLC 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 RELX PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RELX PLC has no effect on the direction of NAKED WINES i.e., NAKED WINES and RELX PLC go up and down completely randomly.

Pair Corralation between NAKED WINES and RELX PLC

Assuming the 90 days horizon NAKED WINES PLC is expected to under-perform the RELX PLC. In addition to that, NAKED WINES is 2.21 times more volatile than RELX PLC. It trades about -0.08 of its total potential returns per unit of risk. RELX PLC is currently generating about 0.06 per unit of volatility. If you would invest  4,226  in RELX PLC on October 10, 2024 and sell it today you would earn a total of  216.00  from holding RELX PLC or generate 5.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

NAKED WINES PLC  vs.  RELX PLC

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.

RELX PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RELX PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, RELX PLC 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 RELX PLC

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

The idea behind NAKED WINES PLC and RELX PLC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.