Correlation Between 191216DD9 and Naked Wines

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Can any of the company-specific risk be diversified away by investing in both 191216DD9 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 191216DD9 and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COCA COLA CO and Naked Wines plc, you can compare the effects of market volatilities on 191216DD9 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 191216DD9 with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of 191216DD9 and Naked Wines.

Diversification Opportunities for 191216DD9 and Naked Wines

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between 191216DD9 and Naked is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding COCA COLA CO 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 191216DD9 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 COCA COLA CO 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 191216DD9 i.e., 191216DD9 and Naked Wines go up and down completely randomly.

Pair Corralation between 191216DD9 and Naked Wines

Assuming the 90 days trading horizon 191216DD9 is expected to generate 4.97 times less return on investment than Naked Wines. But when comparing it to its historical volatility, COCA COLA CO is 3.62 times less risky than Naked Wines. It trades about 0.16 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 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 Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

COCA COLA CO  vs.  Naked Wines plc

 Performance 
       Timeline  
COCA A CO 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in COCA COLA CO are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 191216DD9 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Naked Wines plc 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Naked Wines is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

191216DD9 and Naked Wines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 191216DD9 and Naked Wines

The main advantage of trading using opposite 191216DD9 and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 191216DD9 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.
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The idea behind COCA COLA CO and Naked Wines plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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