Correlation Between Naked Wines and Brown Forman
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Brown Forman 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 Brown Forman 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 Brown Forman, you can compare the effects of market volatilities on Naked Wines and Brown Forman 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 Brown Forman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Brown Forman.
Diversification Opportunities for Naked Wines and Brown Forman
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Naked and Brown is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman 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 Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of Naked Wines i.e., Naked Wines and Brown Forman go up and down completely randomly.
Pair Corralation between Naked Wines and Brown Forman
Assuming the 90 days horizon Naked Wines plc is expected to generate 1.0 times more return on investment than Brown Forman. However, Naked Wines is 1.0 times more volatile than Brown Forman. It trades about 0.22 of its potential returns per unit of risk. Brown Forman is currently generating about -0.44 per unit of risk. If you would invest 252.00 in Naked Wines plc on August 27, 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naked Wines plc vs. Brown Forman
Performance |
| Timeline |
| Naked Wines plc |
| Brown Forman |
Naked Wines and Brown Forman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Brown Forman
The main advantage of trading using opposite Naked Wines and Brown Forman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Brown Forman 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 Brown Forman will offset losses from the drop in Brown Forman'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 |
| Brown Forman vs. Pernod Ricard SA | Brown Forman vs. Willamette Valley Vineyards | Brown Forman vs. MGP Ingredients | Brown Forman vs. Duckhorn Portfolio |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |