Correlation Between Flexible Solutions and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Flexible Solutions 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 Flexible Solutions and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flexible Solutions International and Naked Wines plc, you can compare the effects of market volatilities on Flexible Solutions 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 Flexible Solutions with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flexible Solutions and Naked Wines.
Diversification Opportunities for Flexible Solutions and Naked Wines
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Flexible and Naked is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Flexible Solutions Internation 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 Flexible Solutions 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 Flexible Solutions International 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 Flexible Solutions i.e., Flexible Solutions and Naked Wines go up and down completely randomly.
Pair Corralation between Flexible Solutions and Naked Wines
Considering the 90-day investment horizon Flexible Solutions is expected to generate 1.07 times less return on investment than Naked Wines. But when comparing it to its historical volatility, Flexible Solutions International is 2.32 times less risky than Naked Wines. It trades about 0.12 of its potential returns per unit of risk. Naked Wines plc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 145.00 in Naked Wines plc on September 4, 2024 and sell it today you would earn a total of 126.00 from holding Naked Wines plc or generate 86.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Flexible Solutions Internation vs. Naked Wines plc
Performance |
| Timeline |
| Flexible Solutions |
| Naked Wines plc |
Flexible Solutions and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flexible Solutions and Naked Wines
The main advantage of trading using opposite Flexible Solutions and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexible Solutions 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.| Flexible Solutions vs. Innospec | Flexible Solutions vs. Oil Dri | Flexible Solutions vs. H B Fuller | Flexible Solutions vs. Quaker Chemical |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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