Correlation Between Naked Wines and Pekin Life
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Pekin Life 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 Pekin Life 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 Pekin Life Insurance, you can compare the effects of market volatilities on Naked Wines and Pekin Life 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 Pekin Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Pekin Life.
Diversification Opportunities for Naked Wines and Pekin Life
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Naked and Pekin is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Pekin Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pekin Life Insurance 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 Pekin Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pekin Life Insurance has no effect on the direction of Naked Wines i.e., Naked Wines and Pekin Life go up and down completely randomly.
Pair Corralation between Naked Wines and Pekin Life
Assuming the 90 days horizon Naked Wines plc is expected to generate 61.89 times more return on investment than Pekin Life. However, Naked Wines is 61.89 times more volatile than Pekin Life Insurance. It trades about 0.06 of its potential returns per unit of risk. Pekin Life Insurance is currently generating about 0.04 per unit of risk. If you would invest 145.00 in Naked Wines plc on September 2, 2024 and sell it today you would earn a total of 126.00 from holding Naked Wines plc or generate 86.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Naked Wines plc vs. Pekin Life Insurance
Performance |
| Timeline |
| Naked Wines plc |
| Pekin Life Insurance |
Naked Wines and Pekin Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Pekin Life
The main advantage of trading using opposite Naked Wines and Pekin Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Pekin Life 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 Pekin Life will offset losses from the drop in Pekin Life's long position.| Naked Wines vs. Diageo PLC ADR | Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Constellation Brands Class | Naked Wines vs. Brown Forman |
| Pekin Life vs. HUMANA INC | Pekin Life vs. SCOR PK | Pekin Life vs. Aquagold International | Pekin Life vs. Thrivent High Yield |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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