Correlation Between Naked Wines and Treasury Wine

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

Diversification Opportunities for Naked Wines and Treasury Wine

-0.27

Correlation Coefficient

Naked Wines  Treasury Wine

Very good diversification

The 3 months correlation between Naked and Treasury is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates 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 Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of Naked Wines i.e., Naked Wines and Treasury Wine go up and down completely randomly.

Pair Corralation between Naked Wines and Treasury Wine

Assuming the 90 days horizon Naked Wines plc is expected to generate 3.43 times more return on investment than Treasury Wine. However, Naked Wines is 3.43 times more volatile than Treasury Wine Estates. It trades about 0.07 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about -0.11 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  10.00  from holding Naked Wines plc or generate 15.15% 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.  Treasury Wine Estates

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 5 (%) 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.

Treasury Wine Estates

Risk-Adjusted Performance

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Naked Wines and Treasury Wine

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

The idea behind Naked Wines plc and Treasury Wine Estates 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.