Correlation Between ENSTAR and Naked Wines

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

Diversification Opportunities for ENSTAR and Naked Wines

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between ENSTAR and Naked is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding ENSTAR FIN LLC 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 ENSTAR 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 ENSTAR FIN LLC 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 ENSTAR i.e., ENSTAR and Naked Wines go up and down completely randomly.

Pair Corralation between ENSTAR and Naked Wines

Assuming the 90 days trading horizon ENSTAR FIN LLC is expected to under-perform the Naked Wines. In addition to that, ENSTAR is 42.87 times more volatile than Naked Wines plc. It trades about -0.22 of its total potential returns per unit of risk. Naked Wines plc is currently generating about -0.21 per unit of volatility. If you would invest  271.00  in Naked Wines plc on September 12, 2024 and sell it today you would lose (1.00) from holding Naked Wines plc or give up 0.37% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy59.09%
ValuesDaily Returns

ENSTAR FIN LLC  vs.  Naked Wines plc

 Performance 
       Timeline  
ENSTAR FIN LLC 

Risk-Adjusted Performance

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Over the last 90 days ENSTAR FIN LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for ENSTAR FIN LLC investors.
Naked Wines plc 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Naked Wines plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Naked Wines is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ENSTAR and Naked Wines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ENSTAR and Naked Wines

The main advantage of trading using opposite ENSTAR and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENSTAR 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 ENSTAR FIN LLC 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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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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