Correlation Between Naked Wines and Stevia Corp

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

Diversification Opportunities for Naked Wines and Stevia Corp

-0.39

Correlation Coefficient

Naked Wines  Stevia Corp

Very good diversification

The 3 months correlation between Naked and Stevia is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Stevia Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stevia Corp 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 Stevia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stevia Corp has no effect on the direction of Naked Wines i.e., Naked Wines and Stevia Corp go up and down completely randomly.

Pair Corralation between Naked Wines and Stevia Corp

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the Stevia Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 2.14 times less risky than Stevia Corp. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Stevia Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.20  in Stevia Corp on September 23, 2024 and sell it today you would earn a total of  0.06  from holding Stevia Corp or generate 30.0% return on investment over 90 days.

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

Naked Wines plc  vs.  Stevia Corp

Naked Wines plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Naked Wines may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Stevia Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stevia Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Stevia Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Naked Wines and Stevia Corp

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

The idea behind Naked Wines plc and Stevia Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.