Correlation Between MGP Ingredients and Naked Wines

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Can any of the company-specific risk be diversified away by investing in both MGP Ingredients 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 MGP Ingredients and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGP Ingredients and Naked Wines plc, you can compare the effects of market volatilities on MGP Ingredients 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 MGP Ingredients with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGP Ingredients and Naked Wines.

Diversification Opportunities for MGP Ingredients and Naked Wines

MGPNakedDiversified AwayMGPNakedDiversified Away100%
0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between MGP and Naked is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients i.e., MGP Ingredients and Naked Wines go up and down completely randomly.

Pair Corralation between MGP Ingredients and Naked Wines

Given the investment horizon of 90 days MGP Ingredients is expected to under-perform the Naked Wines. But the stock apears to be less risky and, when comparing its historical volatility, MGP Ingredients is 4.07 times less risky than Naked Wines. The stock trades about -0.33 of its potential returns per unit of risk. The Naked Wines plc is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  198.00  in Naked Wines plc on November 27, 2024 and sell it today you would earn a total of  82.00  from holding Naked Wines plc or generate 41.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

MGP Ingredients  vs.  Naked Wines plc

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -35-30-25-20-15-10-5
JavaScript chart by amCharts 3.21.15MGPI MJWNY
       Timeline  
MGP Ingredients 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days MGP Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb354045
Naked Wines plc 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Naked Wines may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb22.22.42.62.83

MGP Ingredients and Naked Wines Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.24-3.17-2.11-1.050.01370.811.632.463.28 0.020.030.040.050.060.07
JavaScript chart by amCharts 3.21.15MGPI MJWNY
       Returns  

Pair Trading with MGP Ingredients and Naked Wines

The main advantage of trading using opposite MGP Ingredients and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGP Ingredients 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 MGP Ingredients 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.
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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