Correlation Between Gamma Communications and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Gamma Communications 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 Gamma Communications and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications PLC and Naked Wines plc, you can compare the effects of market volatilities on Gamma Communications 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 Gamma Communications with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and Naked Wines.
Diversification Opportunities for Gamma Communications and Naked Wines
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gamma and Naked is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications PLC 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 Gamma Communications 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 Gamma Communications PLC 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 Gamma Communications i.e., Gamma Communications and Naked Wines go up and down completely randomly.
Pair Corralation between Gamma Communications and Naked Wines
Assuming the 90 days trading horizon Gamma Communications PLC is expected to generate 0.59 times more return on investment than Naked Wines. However, Gamma Communications PLC is 1.69 times less risky than Naked Wines. It trades about -0.03 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.25 per unit of risk. If you would invest 158,600 in Gamma Communications PLC on August 29, 2024 and sell it today you would lose (1,200) from holding Gamma Communications PLC or give up 0.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gamma Communications PLC vs. Naked Wines plc
Performance |
| Timeline |
| Gamma Communications PLC |
| Naked Wines plc |
Gamma Communications and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and Naked Wines
The main advantage of trading using opposite Gamma Communications and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications 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.| Gamma Communications vs. SupplyMe Capital PLC | Gamma Communications vs. Premier African Minerals | Gamma Communications vs. SANTANDER UK 8 | Gamma Communications vs. Vodafone Group PLC |
| Naked Wines vs. Associated British Foods | Naked Wines vs. Leroy Seafood Group | Naked Wines vs. Lowland Investment Co | Naked Wines vs. Sligro Food Group |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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