Correlation Between Naked Wines and Four Leaf
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Four Leaf 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 Four Leaf 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 Four Leaf Acquisition, you can compare the effects of market volatilities on Naked Wines and Four Leaf 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 Four Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Four Leaf.
Diversification Opportunities for Naked Wines and Four Leaf
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Naked and Four is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Four Leaf Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Four Leaf Acquisition 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 Four Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Four Leaf Acquisition has no effect on the direction of Naked Wines i.e., Naked Wines and Four Leaf go up and down completely randomly.
Pair Corralation between Naked Wines and Four Leaf
Assuming the 90 days horizon Naked Wines plc is expected to generate 36.78 times more return on investment than Four Leaf. However, Naked Wines is 36.78 times more volatile than Four Leaf Acquisition. It trades about 0.01 of its potential returns per unit of risk. Four Leaf Acquisition is currently generating about 0.1 per unit of risk. If you would invest 384.00 in Naked Wines plc on September 12, 2024 and sell it today you would lose (114.00) from holding Naked Wines plc or give up 29.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.43% |
| Values | Daily Returns |
Naked Wines plc vs. Four Leaf Acquisition
Performance |
| Timeline |
| Naked Wines plc |
| Four Leaf Acquisition |
Naked Wines and Four Leaf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Four Leaf
The main advantage of trading using opposite Naked Wines and Four Leaf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Four Leaf 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 Four Leaf will offset losses from the drop in Four Leaf's long position.| Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Naked Wines plc | Naked Wines vs. Crimson Wine | Naked Wines vs. Brown Forman |
| Four Leaf vs. Jabil Circuit | Four Leaf vs. Plexus Corp | Four Leaf vs. Naked Wines plc | Four Leaf vs. SNDL Inc |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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