Correlation Between Naked Wines and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Naked Wines and NETGEAR 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 NETGEAR 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 NETGEAR, you can compare the effects of market volatilities on Naked Wines and NETGEAR 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 NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and NETGEAR.
Diversification Opportunities for Naked Wines and NETGEAR
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Naked and NETGEAR is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Naked Wines i.e., Naked Wines and NETGEAR go up and down completely randomly.
Pair Corralation between Naked Wines and NETGEAR
Assuming the 90 days horizon Naked Wines plc is expected to under-perform the NETGEAR. But the pink sheet apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 1.69 times less risky than NETGEAR. The pink sheet trades about -0.23 of its potential returns per unit of risk. The NETGEAR is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,446 in NETGEAR on September 19, 2024 and sell it today you would earn a total of 122.00 from holding NETGEAR or generate 4.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Naked Wines plc vs. NETGEAR
Performance |
| Timeline |
| Naked Wines plc |
| NETGEAR |
Naked Wines and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and NETGEAR
The main advantage of trading using opposite Naked Wines and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, NETGEAR 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 NETGEAR will offset losses from the drop in NETGEAR'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 |
| NETGEAR vs. Passage Bio | NETGEAR vs. Black Diamond Therapeutics | NETGEAR vs. Alector | NETGEAR vs. Century Therapeutics |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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