Correlation Between NAKED WINES and State Street

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

Diversification Opportunities for NAKED WINES and State Street

-0.58

Correlation Coefficient

NAKED WINES  State Street

Excellent diversification

The 3 months correlation between NAKED and State is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding NAKED WINES PLC and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of NAKED WINES i.e., NAKED WINES and State Street go up and down completely randomly.

Pair Corralation between NAKED WINES and State Street

Assuming the 90 days horizon NAKED WINES PLC is expected to under-perform the State Street. In addition to that, NAKED WINES is 2.53 times more volatile than State Street. It trades about -0.03 of its total potential returns per unit of risk. State Street is currently generating about 0.04 per unit of volatility. If you would invest  7,057  in State Street on October 4, 2024 and sell it today you would earn a total of  2,346  from holding State Street or generate 33.24% return on investment over 90 days.

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

NAKED WINES PLC  vs.  State Street

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.

State Street

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, State Street reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NAKED WINES and State Street

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

The idea behind NAKED WINES PLC and State Street 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.