Correlation Between Splash Beverage and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Splash Beverage 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 Splash Beverage and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Splash Beverage Group and Naked Wines plc, you can compare the effects of market volatilities on Splash Beverage 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 Splash Beverage with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Splash Beverage and Naked Wines.
Diversification Opportunities for Splash Beverage and Naked Wines
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Splash and Naked is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Splash Beverage Group 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 Splash Beverage 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 Splash Beverage Group 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 Splash Beverage i.e., Splash Beverage and Naked Wines go up and down completely randomly.
Pair Corralation between Splash Beverage and Naked Wines
Given the investment horizon of 90 days Splash Beverage Group is expected to under-perform the Naked Wines. In addition to that, Splash Beverage is 3.35 times more volatile than Naked Wines plc. It trades about -0.02 of its total potential returns per unit of risk. Naked Wines plc is currently generating about 0.22 per unit of volatility. If you would invest 252.00 in Naked Wines plc on August 27, 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 Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Splash Beverage Group vs. Naked Wines plc
Performance |
| Timeline |
| Splash Beverage Group |
| Naked Wines plc |
Splash Beverage and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Splash Beverage and Naked Wines
The main advantage of trading using opposite Splash Beverage and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Splash Beverage 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.| Splash Beverage vs. Andrew Peller Limited | Splash Beverage vs. Naked Wines plc | Splash Beverage vs. Willamette Valley Vineyards | Splash Beverage vs. Naked Wines plc |
| 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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