Correlation Between Naked Wines and BBB Foods
Can any of the company-specific risk be diversified away by investing in both Naked Wines and BBB Foods 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 BBB Foods 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 BBB Foods, you can compare the effects of market volatilities on Naked Wines and BBB Foods 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 BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and BBB Foods.
Diversification Opportunities for Naked Wines and BBB Foods
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Naked and BBB is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods 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 BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Naked Wines i.e., Naked Wines and BBB Foods go up and down completely randomly.
Pair Corralation between Naked Wines and BBB Foods
Assuming the 90 days horizon Naked Wines plc is expected to generate 2.67 times more return on investment than BBB Foods. However, Naked Wines is 2.67 times more volatile than BBB Foods. It trades about 0.03 of its potential returns per unit of risk. BBB Foods is currently generating about 0.09 per unit of risk. If you would invest 241.00 in Naked Wines plc on September 1, 2024 and sell it today you would earn a total of 30.00 from holding Naked Wines plc or generate 12.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 75.93% |
| Values | Daily Returns |
Naked Wines plc vs. BBB Foods
Performance |
| Timeline |
| Naked Wines plc |
| BBB Foods |
Naked Wines and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and BBB Foods
The main advantage of trading using opposite Naked Wines and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, BBB Foods 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 BBB Foods will offset losses from the drop in BBB Foods' long position.| Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Naked Wines plc | Naked Wines vs. Crimson Wine | Naked Wines vs. Brown Forman |
| BBB Foods vs. Ingles Markets Incorporated | BBB Foods vs. Sendas Distribuidora SA | BBB Foods vs. Grocery Outlet Holding | BBB Foods vs. Ocado Group plc |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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