Correlation Between Naked Wines and Keurig Dr

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Can any of the company-specific risk be diversified away by investing in both Naked Wines and Keurig Dr 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 Keurig Dr 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 Keurig Dr Pepper, you can compare the effects of market volatilities on Naked Wines and Keurig Dr 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 Keurig Dr. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Keurig Dr.

Diversification Opportunities for Naked Wines and Keurig Dr

-0.02
  Correlation Coefficient

Good diversification

The 3 months correlation between Naked and Keurig is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Keurig Dr Pepper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keurig Dr Pepper 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 Keurig Dr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keurig Dr Pepper has no effect on the direction of Naked Wines i.e., Naked Wines and Keurig Dr go up and down completely randomly.

Pair Corralation between Naked Wines and Keurig Dr

Assuming the 90 days horizon Naked Wines plc is expected to generate 1.11 times more return on investment than Keurig Dr. However, Naked Wines is 1.11 times more volatile than Keurig Dr Pepper. It trades about 0.22 of its potential returns per unit of risk. Keurig Dr Pepper is currently generating about -0.09 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 Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Naked Wines plc  vs.  Keurig Dr Pepper

 Performance 
       Timeline  
Naked Wines plc 

Risk-Adjusted Performance

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Over the last 90 days Naked Wines plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Naked Wines is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Keurig Dr Pepper 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Keurig Dr Pepper has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Naked Wines and Keurig Dr Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Naked Wines and Keurig Dr

The main advantage of trading using opposite Naked Wines and Keurig Dr positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Keurig Dr 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 Keurig Dr will offset losses from the drop in Keurig Dr's long position.
The idea behind Naked Wines plc and Keurig Dr Pepper 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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