Correlation Between Auto Trader and NAKED WINES
Can any of the company-specific risk be diversified away by investing in both Auto Trader 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 Auto Trader and NAKED WINES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and NAKED WINES PLC, you can compare the effects of market volatilities on Auto Trader 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 Auto Trader with a short position of NAKED WINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and NAKED WINES.
Diversification Opportunities for Auto Trader and NAKED WINES
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Auto and NAKED is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group 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 Auto Trader 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 Auto Trader Group 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 Auto Trader i.e., Auto Trader and NAKED WINES go up and down completely randomly.
Pair Corralation between Auto Trader and NAKED WINES
Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the NAKED WINES. But the stock apears to be less risky and, when comparing its historical volatility, Auto Trader Group is 3.33 times less risky than NAKED WINES. The stock trades about -0.03 of its potential returns per unit of risk. The NAKED WINES PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 56.00 in NAKED WINES PLC on November 5, 2024 and sell it today you would earn a total of 4.00 from holding NAKED WINES PLC or generate 7.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. NAKED WINES PLC
Performance |
| Timeline |
| Auto Trader Group |
| NAKED WINES PLC |
Auto Trader and NAKED WINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and NAKED WINES
The main advantage of trading using opposite Auto Trader and NAKED WINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader 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's long position.| Auto Trader vs. ECHO INVESTMENT ZY | Auto Trader vs. AIR PRODCHEMICALS | Auto Trader vs. Playa Hotels Resorts | Auto Trader vs. Virtus Investment Partners |
| NAKED WINES vs. Major Drilling Group | NAKED WINES vs. Easy Software AG | NAKED WINES vs. VELA TECHNOLPLC LS 0001 | NAKED WINES vs. BioNTech SE |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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