Correlation Between GB Group and Naked Wines
Can any of the company-specific risk be diversified away by investing in both GB Group 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 GB Group and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GB Group plc and Naked Wines plc, you can compare the effects of market volatilities on GB Group 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 GB Group with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of GB Group and Naked Wines.
Diversification Opportunities for GB Group and Naked Wines
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GBG and Naked is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding GB Group 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 GB Group 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 GB Group 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 GB Group i.e., GB Group and Naked Wines go up and down completely randomly.
Pair Corralation between GB Group and Naked Wines
Assuming the 90 days trading horizon GB Group plc is expected to generate 1.29 times more return on investment than Naked Wines. However, GB Group is 1.29 times more volatile than Naked Wines plc. It trades about 0.2 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.24 per unit of risk. If you would invest 34,340 in GB Group plc on September 3, 2024 and sell it today you would earn a total of 3,520 from holding GB Group plc or generate 10.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GB Group plc vs. Naked Wines plc
Performance |
| Timeline |
| GB Group plc |
| Naked Wines plc |
GB Group and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GB Group and Naked Wines
The main advantage of trading using opposite GB Group and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GB Group 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.| GB Group vs. Naked Wines plc | GB Group vs. Europa Metals | GB Group vs. Power Metal Resources | GB Group vs. InterContinental Hotels Group |
| Naked Wines vs. Lowland Investment Co | Naked Wines vs. Hollywood Bowl Group | Naked Wines vs. Bankers Investment Trust | Naked Wines vs. Liberty Media Corp |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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