Correlation Between Algorand and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Algorand 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 Algorand and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algorand and Naked Wines plc, you can compare the effects of market volatilities on Algorand 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 Algorand with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algorand and Naked Wines.
Diversification Opportunities for Algorand and Naked Wines
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Algorand and Naked is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Algorand 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 Algorand 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 Algorand 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 Algorand i.e., Algorand and Naked Wines go up and down completely randomly.
Pair Corralation between Algorand and Naked Wines
Assuming the 90 days trading horizon Algorand is expected to generate 1.83 times more return on investment than Naked Wines. However, Algorand is 1.83 times more volatile than Naked Wines plc. It trades about 0.19 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.21 per unit of risk. If you would invest 35.00 in Algorand on October 20, 2024 and sell it today you would earn a total of 12.00 from holding Algorand or generate 34.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algorand vs. Naked Wines plc
Performance |
| Timeline |
| Algorand |
| Naked Wines plc |
Algorand and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algorand and Naked Wines
The main advantage of trading using opposite Algorand and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algorand 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.The idea behind Algorand and Naked Wines plc 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.| Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Naked Wines plc | Naked Wines vs. Crimson Wine | Naked Wines vs. Brown Forman |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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