Correlation Between Stevia Corp and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Stevia Corp 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 Stevia Corp and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stevia Corp and Naked Wines plc, you can compare the effects of market volatilities on Stevia Corp 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 Stevia Corp with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stevia Corp and Naked Wines.
Diversification Opportunities for Stevia Corp and Naked Wines
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Stevia and Naked is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Stevia Corp 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 Stevia Corp 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 Stevia Corp 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 Stevia Corp i.e., Stevia Corp and Naked Wines go up and down completely randomly.
Pair Corralation between Stevia Corp and Naked Wines
Given the investment horizon of 90 days Stevia Corp is expected to generate 11.99 times more return on investment than Naked Wines. However, Stevia Corp is 11.99 times more volatile than Naked Wines plc. It trades about 0.12 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 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 Together |
Strength | Very Weak |
Accuracy | 97.73% |
Values | Daily Returns |
Stevia Corp vs. Naked Wines plc
Performance |
Timeline |
Stevia Corp |
Naked Wines plc |
Stevia Corp and Naked Wines Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Stevia Corp and Naked Wines
The main advantage of trading using opposite Stevia Corp and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stevia Corp 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.Stevia Corp vs. Becle SA de | Stevia Corp vs. Naked Wines plc | Stevia Corp vs. Willamette Valley Vineyards | Stevia Corp vs. Fresh Grapes LLC |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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