Correlation Between NTG Nordic and NAKED WINES

Can any of the company-specific risk be diversified away by investing in both NTG Nordic and NAKED WINES 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 NTG Nordic and NAKED WINES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NTG Nordic Transport and NAKED WINES PLC, you can compare the effects of market volatilities on NTG Nordic and NAKED WINES 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 NTG Nordic with a short position of NAKED WINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of NTG Nordic and NAKED WINES.

Diversification Opportunities for NTG Nordic and NAKED WINES

0.69

Correlation Coefficient

NTG Nordic  NAKED WINES

Poor diversification

The 3 months correlation between NTG and NAKED is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and NAKED WINES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAKED WINES PLC and NTG Nordic 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 NTG Nordic Transport are associated (or correlated) with NAKED WINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAKED WINES PLC has no effect on the direction of NTG Nordic i.e., NTG Nordic and NAKED WINES go up and down completely randomly.

Pair Corralation between NTG Nordic and NAKED WINES

Assuming the 90 days trading horizon NTG Nordic Transport is expected to generate 0.28 times more return on investment than NAKED WINES. However, NTG Nordic Transport is 3.55 times less risky than NAKED WINES. It trades about -0.36 of its potential returns per unit of risk. NAKED WINES PLC is currently generating about -0.24 per unit of risk. If you would invest  3,685  in NTG Nordic Transport on October 10, 2024 and sell it today you would lose (230.00) from holding NTG Nordic Transport or give up 6.24% of portfolio value over 90 days.

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

NTG Nordic Transport  vs.  NAKED WINES PLC

NTG Nordic Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NTG Nordic Transport has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

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.

Pair Trading with NTG Nordic and NAKED WINES

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

The idea behind NTG Nordic Transport and NAKED WINES 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.