Correlation Between Naked Wines and Crimson Wine
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Crimson 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 Crimson 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 Crimson Wine, you can compare the effects of market volatilities on Naked Wines and Crimson 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 Crimson Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Crimson Wine.
Diversification Opportunities for Naked Wines and Crimson Wine
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Naked and Crimson is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Crimson Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crimson Wine 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 Crimson Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crimson Wine has no effect on the direction of Naked Wines i.e., Naked Wines and Crimson Wine go up and down completely randomly.
Pair Corralation between Naked Wines and Crimson Wine
Assuming the 90 days horizon Naked Wines plc is expected to generate 3.45 times more return on investment than Crimson Wine. However, Naked Wines is 3.45 times more volatile than Crimson Wine. It trades about 0.01 of its potential returns per unit of risk. Crimson Wine is currently generating about 0.02 per unit of risk. If you would invest 118.00 in Naked Wines plc on August 27, 2024 and sell it today you would lose (52.00) from holding Naked Wines plc or give up 44.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naked Wines plc vs. Crimson Wine
Performance |
| Timeline |
| Naked Wines plc |
| Crimson Wine |
Naked Wines and Crimson Wine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Crimson Wine
The main advantage of trading using opposite Naked Wines and Crimson Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Crimson 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 Crimson Wine will offset losses from the drop in Crimson Wine's long position.| Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Crimson Wine | Naked Wines vs. Willamette Valley Vineyards | Naked Wines vs. Brown Forman |
| Crimson Wine vs. Embotelladora Andina SA | Crimson Wine vs. Signet International Holdings | Crimson Wine vs. National Beverage Corp | Crimson Wine vs. PT Astra International |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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