Correlation Between Trainline Plc and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Trainline Plc 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 Trainline Plc and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trainline Plc and Naked Wines plc, you can compare the effects of market volatilities on Trainline Plc 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 Trainline Plc with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trainline Plc and Naked Wines.
Diversification Opportunities for Trainline Plc and Naked Wines
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Trainline and Naked is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Trainline 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 Trainline Plc 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 Trainline 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 Trainline Plc i.e., Trainline Plc and Naked Wines go up and down completely randomly.
Pair Corralation between Trainline Plc and Naked Wines
Assuming the 90 days trading horizon Trainline Plc is expected to under-perform the Naked Wines. But the stock apears to be less risky and, when comparing its historical volatility, Trainline Plc is 1.01 times less risky than Naked Wines. The stock trades about -0.22 of its potential returns per unit of risk. The Naked Wines plc is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 4,775 in Naked Wines plc on October 30, 2024 and sell it today you would lose (175.00) from holding Naked Wines plc or give up 3.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trainline Plc vs. Naked Wines plc
Performance |
| Timeline |
| Trainline Plc |
| Naked Wines plc |
Trainline Plc and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trainline Plc and Naked Wines
The main advantage of trading using opposite Trainline Plc and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trainline Plc 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.| Trainline Plc vs. Jacquet Metal Service | Trainline Plc vs. Melia Hotels | Trainline Plc vs. Erste Group Bank | Trainline Plc vs. Nordea Bank Abp |
| Naked Wines vs. Erste Group Bank | Naked Wines vs. First Class Metals | Naked Wines vs. Bankers Investment Trust | Naked Wines vs. Europa Metals |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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