Correlation Between ORACLE and Naked Wines

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Can any of the company-specific risk be diversified away by investing in both ORACLE 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 ORACLE and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ORACLE P 65 and Naked Wines plc, you can compare the effects of market volatilities on ORACLE 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 ORACLE with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of ORACLE and Naked Wines.

Diversification Opportunities for ORACLE and Naked Wines

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between ORACLE and Naked is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ORACLE P 65 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 ORACLE 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 ORACLE P 65 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 ORACLE i.e., ORACLE and Naked Wines go up and down completely randomly.

Pair Corralation between ORACLE and Naked Wines

Assuming the 90 days trading horizon ORACLE is expected to generate 8.13 times less return on investment than Naked Wines. But when comparing it to its historical volatility, ORACLE P 65 is 6.15 times less risky than Naked Wines. It trades about 0.01 of its potential returns per unit of risk. Naked Wines plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  520.00  in Naked Wines plc on September 3, 2024 and sell it today you would lose (249.00) from holding Naked Wines plc or give up 47.88% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy97.98%
ValuesDaily Returns

ORACLE P 65  vs.  Naked Wines plc

 Performance 
       Timeline  
ORACLE P 65 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days ORACLE P 65 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ORACLE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Naked Wines plc 

Risk-Adjusted Performance

0 of 100

 
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.

ORACLE and Naked Wines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ORACLE and Naked Wines

The main advantage of trading using opposite ORACLE and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ORACLE 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 ORACLE P 65 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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