Correlation Between Naked Wines and Remy Cointreau

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

Diversification Opportunities for Naked Wines and Remy Cointreau

-0.47

Correlation Coefficient

Naked Wines  Remy Cointreau

Very good diversification

The 3 months correlation between Naked and Remy is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Remy Cointreau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Remy Cointreau SA 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 Remy Cointreau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Remy Cointreau SA has no effect on the direction of Naked Wines i.e., Naked Wines and Remy Cointreau go up and down completely randomly.

Pair Corralation between Naked Wines and Remy Cointreau

Assuming the 90 days horizon Naked Wines plc is expected to generate 3.1 times more return on investment than Remy Cointreau. However, Naked Wines is 3.1 times more volatile than Remy Cointreau SA. It trades about 0.08 of its potential returns per unit of risk. Remy Cointreau SA is currently generating about -0.15 per unit of risk. If you would invest  66.00  in Naked Wines plc on December 27, 2024 and sell it today you would earn a total of  14.00  from holding Naked Wines plc or generate 21.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Naked Wines plc  vs.  Remy Cointreau SA

Naked Wines plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Naked Wines reported solid returns over the last few months and may actually be approaching a breakup point.

Remy Cointreau SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Remy Cointreau SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Naked Wines and Remy Cointreau

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

The idea behind Naked Wines plc and Remy Cointreau SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.