Correlation Between National Beverage and Naked Wines
Can any of the company-specific risk be diversified away by investing in both National Beverage 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 National Beverage and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Beverage Corp and Naked Wines plc, you can compare the effects of market volatilities on National Beverage 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 National Beverage with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Naked Wines.
Diversification Opportunities for National Beverage and Naked Wines
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and Naked is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp 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 National Beverage 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 National Beverage Corp 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 National Beverage i.e., National Beverage and Naked Wines go up and down completely randomly.
Pair Corralation between National Beverage and Naked Wines
Assuming the 90 days trading horizon National Beverage Corp is expected to generate 0.5 times more return on investment than Naked Wines. However, National Beverage Corp is 1.98 times less risky than Naked Wines. It trades about -0.17 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.12 per unit of risk. If you would invest 4,800 in National Beverage Corp on October 23, 2024 and sell it today you would lose (523.00) from holding National Beverage Corp or give up 10.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.5% |
| Values | Daily Returns |
National Beverage Corp vs. Naked Wines plc
Performance |
| Timeline |
| National Beverage Corp |
| Naked Wines plc |
National Beverage and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and Naked Wines
The main advantage of trading using opposite National Beverage and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage 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.| National Beverage vs. Home Depot | National Beverage vs. Weiss Korea Opportunity | National Beverage vs. River and Mercantile | National Beverage vs. Chrysalis Investments |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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