Correlation Between Naked Wines and Bankers Investment

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

Diversification Opportunities for Naked Wines and Bankers Investment

NakedBankersDiversified AwayNakedBankersDiversified Away100%
0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between Naked and Bankers is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Bankers Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankers Investment Trust 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 Bankers Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bankers Investment Trust has no effect on the direction of Naked Wines i.e., Naked Wines and Bankers Investment go up and down completely randomly.

Pair Corralation between Naked Wines and Bankers Investment

Assuming the 90 days trading horizon Naked Wines plc is expected to under-perform the Bankers Investment. But the stock apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 4.42 times less risky than Bankers Investment. The stock trades about -0.02 of its potential returns per unit of risk. The Bankers Investment Trust is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,211  in Bankers Investment Trust on November 19, 2024 and sell it today you would earn a total of  7,149  from holding Bankers Investment Trust or generate 137.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Naked Wines plc  vs.  Bankers Investment Trust

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 050100150
JavaScript chart by amCharts 3.21.15WINE BNKR
       Timeline  
Naked Wines plc 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb444648505254565860
Bankers Investment Trust 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Bankers Investment Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bankers Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb60708090100110120

Naked Wines and Bankers Investment Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.18-3.88-2.58-1.28-0.02151.272.563.855.14 0.0050.0100.0150.0200.0250.0300.035
JavaScript chart by amCharts 3.21.15WINE BNKR
       Returns  

Pair Trading with Naked Wines and Bankers Investment

The main advantage of trading using opposite Naked Wines and Bankers Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Bankers 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 Bankers Investment will offset losses from the drop in Bankers Investment's long position.
The idea behind Naked Wines plc and Bankers Investment Trust 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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