Correlation Between Various Eateries and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Various Eateries 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 Various Eateries and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Various Eateries PLC and Naked Wines plc, you can compare the effects of market volatilities on Various Eateries 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 Various Eateries with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Various Eateries and Naked Wines.
Diversification Opportunities for Various Eateries and Naked Wines
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Various and Naked is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Various Eateries 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 Various Eateries 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 Various Eateries 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 Various Eateries i.e., Various Eateries and Naked Wines go up and down completely randomly.
Pair Corralation between Various Eateries and Naked Wines
Assuming the 90 days trading horizon Various Eateries PLC is expected to under-perform the Naked Wines. But the stock apears to be less risky and, when comparing its historical volatility, Various Eateries PLC is 4.28 times less risky than Naked Wines. The stock trades about -0.32 of its potential returns per unit of risk. The Naked Wines plc is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 4,590 in Naked Wines plc on November 5, 2024 and sell it today you would earn a total of 910.00 from holding Naked Wines plc or generate 19.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Various Eateries PLC vs. Naked Wines plc
Performance |
| Timeline |
| Various Eateries PLC |
| Naked Wines plc |
Various Eateries and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Various Eateries and Naked Wines
The main advantage of trading using opposite Various Eateries and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Various Eateries 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.| Various Eateries vs. MTI Wireless Edge | Various Eateries vs. Zoom Video Communications | Various Eateries vs. Gruppo MutuiOnline SpA | Various Eateries vs. Wizz Air Holdings |
| Naked Wines vs. MTI Wireless Edge | Naked Wines vs. PPHE Hotel Group | Naked Wines vs. Gaztransport et Technigaz | Naked Wines vs. GreenX 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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