Correlation Between NYSE Composite and Naked Wines
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Naked Wines plc, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Naked Wines.
Diversification Opportunities for NYSE Composite and Naked Wines
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and Naked is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Naked Wines go up and down completely randomly.
Pair Corralation between NYSE Composite and Naked Wines
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.2 times less return on investment than Naked Wines. But when comparing it to its historical volatility, NYSE Composite is 2.44 times less risky than Naked Wines. It trades about 0.24 of its potential returns per unit of risk. Naked Wines plc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 252.00 in Naked Wines plc on August 28, 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Naked Wines plc
Performance |
| Timeline |
NYSE Composite and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Naked Wines plc
Pair trading matchups for Naked Wines
Pair Trading with NYSE Composite and Naked Wines
The main advantage of trading using opposite NYSE Composite and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| Naked Wines vs. Diageo PLC ADR | Naked Wines vs. Constellation Brands Class | Naked Wines vs. Morningstar Unconstrained Allocation | Naked Wines 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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