Correlation Between Naked Wines and RTW Venture

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

Diversification Opportunities for Naked Wines and RTW Venture

0.59

Correlation Coefficient

Naked Wines  RTW Venture

Very weak diversification

The 3 months correlation between Naked and RTW is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and RTW Venture Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTW Venture Fund 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 RTW Venture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTW Venture Fund has no effect on the direction of Naked Wines i.e., Naked Wines and RTW Venture go up and down completely randomly.

Pair Corralation between Naked Wines and RTW Venture

Assuming the 90 days trading horizon Naked Wines plc is expected to under-perform the RTW Venture. In addition to that, Naked Wines is 2.78 times more volatile than RTW Venture Fund. It trades about -0.03 of its total potential returns per unit of risk. RTW Venture Fund is currently generating about -0.03 per unit of volatility. If you would invest  154.00  in RTW Venture Fund on September 4, 2024 and sell it today you would lose (3.00) from holding RTW Venture Fund or give up 1.95% of portfolio value over 90 days.

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

Naked Wines plc  vs.  RTW Venture Fund

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

RTW Venture Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RTW Venture Fund has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, RTW Venture 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 RTW Venture

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

The idea behind Naked Wines plc and RTW Venture Fund 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.