Correlation Between Naked Wines and Flexible Solutions
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Flexible Solutions 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 Flexible Solutions 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 Flexible Solutions International, you can compare the effects of market volatilities on Naked Wines and Flexible Solutions 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 Flexible Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Flexible Solutions.
Diversification Opportunities for Naked Wines and Flexible Solutions
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Naked and Flexible is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of Naked Wines i.e., Naked Wines and Flexible Solutions go up and down completely randomly.
Pair Corralation between Naked Wines and Flexible Solutions
Assuming the 90 days horizon Naked Wines plc is expected to under-perform the Flexible Solutions. But the pink sheet apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 1.85 times less risky than Flexible Solutions. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Flexible Solutions International is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 197.00 in Flexible Solutions International on September 12, 2024 and sell it today you would earn a total of 181.00 from holding Flexible Solutions International or generate 91.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Naked Wines plc vs. Flexible Solutions Internation
Performance |
| Timeline |
| Naked Wines plc |
| Flexible Solutions |
Naked Wines and Flexible Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Flexible Solutions
The main advantage of trading using opposite Naked Wines and Flexible Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Flexible Solutions 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 Flexible Solutions will offset losses from the drop in Flexible Solutions' long position.| Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Naked Wines plc | Naked Wines vs. Crimson Wine | Naked Wines vs. Brown Forman |
| Flexible Solutions vs. Orion Engineered Carbons | Flexible Solutions vs. International Flavors Fragrances | Flexible Solutions vs. Sociedad Quimica y | Flexible Solutions vs. Albemarle 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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