Correlation Between Metals Exploration and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Metals Exploration 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 Metals Exploration and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metals Exploration Plc and Naked Wines plc, you can compare the effects of market volatilities on Metals Exploration 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 Metals Exploration with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metals Exploration and Naked Wines.
Diversification Opportunities for Metals Exploration and Naked Wines
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Metals and Naked is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Metals Exploration Plc 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 Metals Exploration 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 Metals Exploration Plc 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 Metals Exploration i.e., Metals Exploration and Naked Wines go up and down completely randomly.
Pair Corralation between Metals Exploration and Naked Wines
Assuming the 90 days trading horizon Metals Exploration Plc is expected to generate 1.0 times more return on investment than Naked Wines. However, Metals Exploration is 1.0 times more volatile than Naked Wines plc. It trades about 0.1 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.03 per unit of risk. If you would invest 165.00 in Metals Exploration Plc on August 31, 2024 and sell it today you would earn a total of 405.00 from holding Metals Exploration Plc or generate 245.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metals Exploration Plc vs. Naked Wines plc
Performance |
| Timeline |
| Metals Exploration Plc |
| Naked Wines plc |
Metals Exploration and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metals Exploration and Naked Wines
The main advantage of trading using opposite Metals Exploration and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metals Exploration 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' long position.The idea behind Metals Exploration Plc and Naked Wines plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Naked Wines vs. Jacquet Metal Service | Naked Wines vs. Tyson Foods Cl | Naked Wines vs. Hochschild Mining plc | Naked Wines vs. Metals Exploration 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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