Correlation Between ITALIAN WINE and NAKED WINES
Can any of the company-specific risk be diversified away by investing in both ITALIAN WINE and NAKED WINES 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 ITALIAN WINE and NAKED WINES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITALIAN WINE BRANDS and NAKED WINES PLC, you can compare the effects of market volatilities on ITALIAN WINE and NAKED WINES 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 ITALIAN WINE with a short position of NAKED WINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITALIAN WINE and NAKED WINES.
Diversification Opportunities for ITALIAN WINE and NAKED WINES
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ITALIAN and NAKED is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and NAKED WINES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAKED WINES PLC and ITALIAN WINE 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 ITALIAN WINE BRANDS are associated (or correlated) with NAKED WINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAKED WINES PLC has no effect on the direction of ITALIAN WINE i.e., ITALIAN WINE and NAKED WINES go up and down completely randomly.
Pair Corralation between ITALIAN WINE and NAKED WINES
Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to under-perform the NAKED WINES. But the stock apears to be less risky and, when comparing its historical volatility, ITALIAN WINE BRANDS is 2.12 times less risky than NAKED WINES. The stock trades about -0.04 of its potential returns per unit of risk. The NAKED WINES PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 53.00 in NAKED WINES PLC on November 3, 2024 and sell it today you would earn a total of 4.00 from holding NAKED WINES PLC or generate 7.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
ITALIAN WINE BRANDS vs. NAKED WINES PLC
Performance |
| Timeline |
| ITALIAN WINE BRANDS |
| NAKED WINES PLC |
ITALIAN WINE and NAKED WINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITALIAN WINE and NAKED WINES
The main advantage of trading using opposite ITALIAN WINE and NAKED WINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE position performs unexpectedly, NAKED WINES 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 NAKED WINES will offset losses from the drop in NAKED WINES's long position.| ITALIAN WINE vs. MGP Ingredients | ITALIAN WINE vs. NAKED WINES PLC | ITALIAN WINE vs. CHINA TONTINE WINES | ITALIAN WINE vs. Superior Plus Corp |
| NAKED WINES vs. Heidelberg Materials AG | NAKED WINES vs. THRACE PLASTICS | NAKED WINES vs. Summit Materials | NAKED WINES vs. Sumitomo Rubber Industries |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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