Correlation Between SNDL and Naked Wines

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

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

Diversification Opportunities for SNDL and Naked Wines

0.4

Correlation Coefficient

SNDL  Naked Wines

Very weak diversification

The 3 months correlation between SNDL and Naked is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SNDL Inc 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 SNDL 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 SNDL Inc 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 SNDL i.e., SNDL and Naked Wines go up and down completely randomly.

Pair Corralation between SNDL and Naked Wines

Given the investment horizon of 90 days SNDL Inc is expected to generate 1.03 times more return on investment than Naked Wines. However, SNDL is 1.03 times more volatile than Naked Wines plc. It trades about -0.08 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.11 per unit of risk. If you would invest  211.00  in SNDL Inc on October 24, 2024 and sell it today you would lose (36.00) from holding SNDL Inc or give up 17.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

SNDL Inc  vs.  Naked Wines plc

SNDL Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with SNDL and Naked Wines

The main advantage of trading using opposite SNDL and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SNDL 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 SNDL Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.