Correlation Between Virgin Wines and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Virgin Wines 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 Virgin Wines and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virgin Wines UK and Naked Wines plc, you can compare the effects of market volatilities on Virgin Wines 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 Virgin Wines with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virgin Wines and Naked Wines.
Diversification Opportunities for Virgin Wines and Naked Wines
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Virgin and Naked is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Wines UK 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 Virgin Wines 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 Virgin Wines UK 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 Virgin Wines i.e., Virgin Wines and Naked Wines go up and down completely randomly.
Pair Corralation between Virgin Wines and Naked Wines
Assuming the 90 days trading horizon Virgin Wines is expected to generate 1.88 times less return on investment than Naked Wines. But when comparing it to its historical volatility, Virgin Wines UK is 1.34 times less risky than Naked Wines. It trades about 0.1 of its potential returns per unit of risk. Naked Wines plc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 5,155 in Naked Wines plc on December 3, 2024 and sell it today you would earn a total of 1,665 from holding Naked Wines plc or generate 32.3% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Virgin Wines UK vs. Naked Wines plc
Performance |
Timeline |
Virgin Wines UK |
Naked Wines plc |
Virgin Wines and Naked Wines Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Virgin Wines and Naked Wines
The main advantage of trading using opposite Virgin Wines and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virgin Wines 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.Virgin Wines vs. URU Metals | Virgin Wines vs. Fulcrum Metals PLC | Virgin Wines vs. Science in Sport | Virgin Wines vs. Automatic Data Processing |
Naked Wines vs. Coor Service Management | Naked Wines vs. Gaztransport et Technigaz | Naked Wines vs. Adriatic Metals | Naked Wines vs. Future Metals NL |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Commodity Directory Find actively traded commodities issued by global exchanges | |
Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |