Correlation Between Naked Wines and Schroders Investment

Can any of the company-specific risk be diversified away by investing in both Naked Wines and Schroders Investment 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 Schroders Investment 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 Schroders Investment Trusts, you can compare the effects of market volatilities on Naked Wines and Schroders Investment 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 Schroders Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Schroders Investment.

Diversification Opportunities for Naked Wines and Schroders Investment

-0.07

Correlation Coefficient

Naked Wines  Schroders Investment

Good diversification

The 3 months correlation between Naked and Schroders is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Schroders Investment Trusts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schroders Investment 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 Schroders Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schroders Investment has no effect on the direction of Naked Wines i.e., Naked Wines and Schroders Investment go up and down completely randomly.

Pair Corralation between Naked Wines and Schroders Investment

Assuming the 90 days trading horizon Naked Wines plc is expected to under-perform the Schroders Investment. In addition to that, Naked Wines is 3.72 times more volatile than Schroders Investment Trusts. It trades about -0.11 of its total potential returns per unit of risk. Schroders Investment Trusts is currently generating about 0.0 per unit of volatility. If you would invest  48,200  in Schroders Investment Trusts on October 17, 2024 and sell it today you would lose (100.00) from holding Schroders Investment Trusts or give up 0.21% of portfolio value over 90 days.

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

Naked Wines plc  vs.  Schroders Investment Trusts

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Schroders Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schroders Investment Trusts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Schroders Investment is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Naked Wines and Schroders Investment

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

The idea behind Naked Wines plc and Schroders Investment Trusts 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.