Correlation Between Naked Wines and Ambev SA
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Ambev SA 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 Naked Wines and Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Naked Wines plc and Ambev SA ADR, you can compare the effects of market volatilities on Naked Wines and Ambev SA 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 Naked Wines with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Ambev SA.
Diversification Opportunities for Naked Wines and Ambev SA
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Naked and Ambev is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Ambev SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA ADR and Naked Wines 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 Naked Wines plc are associated (or correlated) with Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA ADR has no effect on the direction of Naked Wines i.e., Naked Wines and Ambev SA go up and down completely randomly.
Pair Corralation between Naked Wines and Ambev SA
Assuming the 90 days horizon Naked Wines plc is expected to generate 1.15 times more return on investment than Ambev SA. However, Naked Wines is 1.15 times more volatile than Ambev SA ADR. It trades about 0.22 of its potential returns per unit of risk. Ambev SA ADR is currently generating about -0.15 per unit of risk. If you would invest 252.00 in Naked Wines plc on August 28, 2024 and sell it today you would earn a total of 19.00 from holding Naked Wines plc or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Naked Wines plc vs. Ambev SA ADR
Performance |
| Timeline |
| Naked Wines plc |
| Ambev SA ADR |
Naked Wines and Ambev SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Ambev SA
The main advantage of trading using opposite Naked Wines and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Ambev SA 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 Ambev SA will offset losses from the drop in Ambev SA's long position.| Naked Wines vs. Diageo PLC ADR | Naked Wines vs. Constellation Brands Class | Naked Wines vs. Morningstar Unconstrained Allocation | Naked Wines vs. SEI Investments |
| Ambev SA vs. Budweiser Brewing | Ambev SA vs. Anheuser Busch InBev SANV | Ambev SA vs. Fomento Economico Mexicano | Ambev SA vs. Anheuser Busch Inbev |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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