Correlation Between RTW Venture and Naked Wines

Can any of the company-specific risk be diversified away by investing in both RTW Venture 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 RTW Venture and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RTW Venture Fund and Naked Wines plc, you can compare the effects of market volatilities on RTW Venture 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 RTW Venture with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of RTW Venture and Naked Wines.

Diversification Opportunities for RTW Venture and Naked Wines

0.59

Correlation Coefficient

RTW Venture  Naked Wines

Very weak diversification

The 3 months correlation between RTW and Naked is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding RTW Venture Fund 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 RTW Venture 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 RTW Venture Fund 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 RTW Venture i.e., RTW Venture and Naked Wines go up and down completely randomly.

Pair Corralation between RTW Venture and Naked Wines

Assuming the 90 days trading horizon RTW Venture Fund is expected to under-perform the Naked Wines. But the stock apears to be less risky and, when comparing its historical volatility, RTW Venture Fund is 2.34 times less risky than Naked Wines. The stock trades about -0.06 of its potential returns per unit of risk. The Naked Wines plc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,570  in Naked Wines plc on September 12, 2024 and sell it today you would earn a total of  30.00  from holding Naked Wines plc or generate 0.54% return on investment over 90 days.

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

RTW Venture Fund  vs.  Naked Wines plc

RTW Venture Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RTW Venture Fund has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, RTW Venture is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Naked Wines plc

Risk-Adjusted Performance

4 of 100

Weak

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

Pair Trading with RTW Venture and Naked Wines

The main advantage of trading using opposite RTW Venture and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RTW Venture 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' long position.

The idea behind RTW Venture Fund 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.