Correlation Between NAKED WINES and Universal Entertainment

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

Diversification Opportunities for NAKED WINES and Universal Entertainment

0.83

Correlation Coefficient

NAKED WINES  Universal Entertainment

Very poor diversification

The 3 months correlation between NAKED and Universal is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding NAKED WINES PLC and Universal Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Entertainment 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 Universal Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Entertainment has no effect on the direction of NAKED WINES i.e., NAKED WINES and Universal Entertainment go up and down completely randomly.

Pair Corralation between NAKED WINES and Universal Entertainment

Assuming the 90 days horizon NAKED WINES PLC is expected to under-perform the Universal Entertainment. In addition to that, NAKED WINES is 1.3 times more volatile than Universal Entertainment. It trades about -0.04 of its total potential returns per unit of risk. Universal Entertainment is currently generating about 0.23 per unit of volatility. If you would invest  585.00  in Universal Entertainment on October 22, 2024 and sell it today you would earn a total of  65.00  from holding Universal Entertainment or generate 11.11% return on investment over 90 days.

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

NAKED WINES PLC  vs.  Universal Entertainment

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.

Universal Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with NAKED WINES and Universal Entertainment

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

The idea behind NAKED WINES PLC and Universal Entertainment 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.