Correlation Between Naked Wines and Lloyds Banking

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

Diversification Opportunities for Naked Wines and Lloyds Banking

-0.83

Correlation Coefficient

Naked Wines  Lloyds Banking

Pay attention - limited upside

The 3 months correlation between Naked and Lloyds is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking Group 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 Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of Naked Wines i.e., Naked Wines and Lloyds Banking go up and down completely randomly.

Pair Corralation between Naked Wines and Lloyds Banking

Assuming the 90 days trading horizon Naked Wines plc is expected to under-perform the Lloyds Banking. In addition to that, Naked Wines is 15.65 times more volatile than Lloyds Banking Group. It trades about -0.28 of its total potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.54 per unit of volatility. If you would invest  14,030  in Lloyds Banking Group on October 8, 2024 and sell it today you would earn a total of  295.00  from holding Lloyds Banking Group or generate 2.1% return on investment over 90 days.

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

Naked Wines plc  vs.  Lloyds Banking Group

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.

Lloyds Banking Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Banking Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lloyds Banking is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Naked Wines and Lloyds Banking

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

The idea behind Naked Wines plc and Lloyds Banking Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.