Correlation Between Federal Realty and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Federal Realty and Naked Wines 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 Federal Realty and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Realty Investment and Naked Wines plc, you can compare the effects of market volatilities on Federal Realty and Naked Wines 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 Federal Realty with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Realty and Naked Wines.
Diversification Opportunities for Federal Realty and Naked Wines
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Federal and Naked is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Federal Realty Investment and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines plc and Federal Realty 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 Federal Realty Investment are associated (or correlated) with Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of Federal Realty i.e., Federal Realty and Naked Wines go up and down completely randomly.
Pair Corralation between Federal Realty and Naked Wines
Assuming the 90 days trading horizon Federal Realty Investment is expected to generate 0.37 times more return on investment than Naked Wines. However, Federal Realty Investment is 2.67 times less risky than Naked Wines. It trades about -0.1 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.06 per unit of risk. If you would invest 11,535 in Federal Realty Investment on September 12, 2024 and sell it today you would lose (234.00) from holding Federal Realty Investment or give up 2.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Federal Realty Investment vs. Naked Wines plc
Performance |
| Timeline |
| Federal Realty Investment |
| Naked Wines plc |
Federal Realty and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Realty and Naked Wines
The main advantage of trading using opposite Federal Realty and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Realty position performs unexpectedly, Naked Wines 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 Naked Wines will offset losses from the drop in Naked Wines' long position.| Federal Realty vs. Hong Kong Land | Federal Realty vs. Neometals | Federal Realty vs. Coor Service Management | Federal Realty vs. Fidelity Sustainable USD |
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Check out your portfolio center.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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