Correlation Between Regions Financial and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Regions Financial 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 Regions Financial and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regions Financial and Naked Wines plc, you can compare the effects of market volatilities on Regions Financial 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 Regions Financial with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regions Financial and Naked Wines.
Diversification Opportunities for Regions Financial and Naked Wines
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Regions and Naked is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial 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 Regions Financial 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 Regions Financial 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 Regions Financial i.e., Regions Financial and Naked Wines go up and down completely randomly.
Pair Corralation between Regions Financial and Naked Wines
Assuming the 90 days horizon Regions Financial is expected to generate 1.44 times less return on investment than Naked Wines. But when comparing it to its historical volatility, Regions Financial is 4.72 times less risky than Naked Wines. It trades about 0.03 of its potential returns per unit of risk. Naked Wines plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 520.00 in Naked Wines plc on August 24, 2024 and sell it today you would lose (249.00) from holding Naked Wines plc or give up 47.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Regions Financial vs. Naked Wines plc
Performance |
| Timeline |
| Regions Financial |
| Naked Wines plc |
Regions Financial and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regions Financial and Naked Wines
The main advantage of trading using opposite Regions Financial and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regions Financial 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.| Regions Financial vs. Naked Wines plc | Regions Financial vs. First Watch Restaurant | Regions Financial vs. Primo Brands | Regions Financial vs. SNDL Inc |
| Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Naked Wines plc | Naked Wines vs. Crimson Wine | Naked Wines vs. Brown Forman |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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