Correlation Between Naked Wines and Treasury Wine
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Treasury Wine 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 Treasury Wine 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 Treasury Wine Estates, you can compare the effects of market volatilities on Naked Wines and Treasury Wine 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 Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Treasury Wine.
Diversification Opportunities for Naked Wines and Treasury Wine
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Naked and Treasury is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates 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 Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of Naked Wines i.e., Naked Wines and Treasury Wine go up and down completely randomly.
Pair Corralation between Naked Wines and Treasury Wine
Assuming the 90 days horizon Naked Wines plc is expected to generate 0.87 times more return on investment than Treasury Wine. However, Naked Wines plc is 1.15 times less risky than Treasury Wine. It trades about 0.22 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about -0.11 per unit of risk. If you would invest 252.00 in Naked Wines plc on August 27, 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 Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naked Wines plc vs. Treasury Wine Estates
Performance |
| Timeline |
| Naked Wines plc |
| Treasury Wine Estates |
Naked Wines and Treasury Wine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Treasury Wine
The main advantage of trading using opposite Naked Wines and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Treasury Wine 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 Treasury Wine will offset losses from the drop in Treasury Wine's long position.| Naked Wines vs. Diageo PLC ADR | Naked Wines vs. Constellation Brands Class | Naked Wines vs. Morningstar Unconstrained Allocation | Naked Wines vs. SEI Investments |
| Treasury Wine vs. Diageo PLC ADR | Treasury Wine vs. Constellation Brands Class | Treasury Wine vs. Morningstar Unconstrained Allocation | Treasury Wine vs. SEI Investments |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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