Correlation Between Tatton Asset and Naked Wines

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

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

Diversification Opportunities for Tatton Asset and Naked Wines

-0.29

Correlation Coefficient

Tatton Asset  Naked Wines

Very good diversification

The 3 months correlation between Tatton and Naked is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Tatton Asset Management 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 Tatton Asset 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 Tatton Asset Management 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 Tatton Asset i.e., Tatton Asset and Naked Wines go up and down completely randomly.

Pair Corralation between Tatton Asset and Naked Wines

Assuming the 90 days trading horizon Tatton Asset Management is expected to generate 0.62 times more return on investment than Naked Wines. However, Tatton Asset Management is 1.62 times less risky than Naked Wines. It trades about 0.03 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.07 per unit of risk. If you would invest  65,699  in Tatton Asset Management on September 30, 2024 and sell it today you would earn a total of  3,301  from holding Tatton Asset Management or generate 5.02% return on investment over 90 days.

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

Tatton Asset Management  vs.  Naked Wines plc

Tatton Asset Management

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tatton Asset Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Tatton Asset 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

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Tatton Asset and Naked Wines

The main advantage of trading using opposite Tatton Asset and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tatton Asset 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 Tatton Asset Management 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.