Correlation Between Treasury Wine and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Treasury Wine 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 Treasury Wine and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Treasury Wine Estates and Naked Wines plc, you can compare the effects of market volatilities on Treasury Wine 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 Treasury Wine with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treasury Wine and Naked Wines.
Diversification Opportunities for Treasury Wine and Naked Wines
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Treasury and Naked is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates 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 Treasury Wine 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 Treasury Wine Estates 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 Treasury Wine i.e., Treasury Wine and Naked Wines go up and down completely randomly.
Pair Corralation between Treasury Wine and Naked Wines
Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the Naked Wines. But the pink sheet apears to be less risky and, when comparing its historical volatility, Treasury Wine Estates is 3.62 times less risky than Naked Wines. The pink sheet trades about -0.29 of its potential returns per unit of risk. The Naked Wines plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 57.00 in Naked Wines plc on November 1, 2024 and sell it today you would earn a total of 3.00 from holding Naked Wines plc or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Treasury Wine Estates vs. Naked Wines plc
Performance |
| Timeline |
| Treasury Wine Estates |
| Naked Wines plc |
Treasury Wine and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Treasury Wine and Naked Wines
The main advantage of trading using opposite Treasury Wine and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine 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.| Treasury Wine vs. Diageo PLC ADR | Treasury Wine vs. Pernod Ricard SA | Treasury Wine vs. Remy Cointreau SA | Treasury Wine vs. MGP Ingredients |
| Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Crimson Wine | Naked Wines vs. Willamette Valley Vineyards | 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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