Correlation Between Naked Wines and Grieg Seafood

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

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

Diversification Opportunities for Naked Wines and Grieg Seafood

0.34

Correlation Coefficient

Naked Wines  Grieg Seafood

Weak diversification

The 3 months correlation between Naked and Grieg is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Grieg Seafood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grieg Seafood and Naked 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 Naked Wines plc are associated (or correlated) with Grieg Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grieg Seafood has no effect on the direction of Naked Wines i.e., Naked Wines and Grieg Seafood go up and down completely randomly.

Pair Corralation between Naked Wines and Grieg Seafood

Assuming the 90 days trading horizon Naked Wines plc is expected to under-perform the Grieg Seafood. In addition to that, Naked Wines is 1.11 times more volatile than Grieg Seafood. It trades about -0.01 of its total potential returns per unit of risk. Grieg Seafood is currently generating about 0.04 per unit of volatility. If you would invest  6,522  in Grieg Seafood on November 20, 2024 and sell it today you would earn a total of  363.00  from holding Grieg Seafood or generate 5.57% return on investment over 90 days.

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

Naked Wines plc  vs.  Grieg Seafood

Naked Wines plc

Risk-Adjusted Performance

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 comparatively stable basic indicators, Naked Wines is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Grieg Seafood

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grieg Seafood are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Grieg Seafood may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Naked Wines and Grieg Seafood

The main advantage of trading using opposite Naked Wines and Grieg Seafood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Grieg Seafood 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 Grieg Seafood will offset losses from the drop in Grieg Seafood's long position.

The idea behind Naked Wines plc and Grieg Seafood 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.