Correlation Between TFS FINANCIAL and NAKED WINES

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

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

Diversification Opportunities for TFS FINANCIAL and NAKED WINES

-0.16

Correlation Coefficient

TFS FINANCIAL  NAKED WINES

Good diversification

The 3 months correlation between TFS and NAKED is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL 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 TFS FINANCIAL 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 TFS FINANCIAL 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 TFS FINANCIAL i.e., TFS FINANCIAL and NAKED WINES go up and down completely randomly.

Pair Corralation between TFS FINANCIAL and NAKED WINES

Assuming the 90 days trading horizon TFS FINANCIAL is expected to generate 0.39 times more return on investment than NAKED WINES. However, TFS FINANCIAL is 2.58 times less risky than NAKED WINES. It trades about 0.02 of its potential returns per unit of risk. NAKED WINES PLC is currently generating about -0.03 per unit of risk. If you would invest  1,069  in TFS FINANCIAL on October 22, 2024 and sell it today you would earn a total of  141.00  from holding TFS FINANCIAL or generate 13.19% return on investment over 90 days.

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

TFS FINANCIAL  vs.  NAKED WINES PLC

TFS FINANCIAL

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TFS FINANCIAL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TFS FINANCIAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 TFS FINANCIAL and NAKED WINES

The main advantage of trading using opposite TFS FINANCIAL and NAKED WINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFS FINANCIAL 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 TFS FINANCIAL 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.