Correlation Between Vodka Brands and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Vodka Brands 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 Vodka Brands and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vodka Brands Corp and Naked Wines plc, you can compare the effects of market volatilities on Vodka Brands 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 Vodka Brands with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodka Brands and Naked Wines.
Diversification Opportunities for Vodka Brands and Naked Wines
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vodka and Naked is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Vodka Brands Corp 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 Vodka Brands 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 Vodka Brands Corp 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 Vodka Brands i.e., Vodka Brands and Naked Wines go up and down completely randomly.
Pair Corralation between Vodka Brands and Naked Wines
Given the investment horizon of 90 days Vodka Brands Corp is expected to generate 1.05 times more return on investment than Naked Wines. However, Vodka Brands is 1.05 times more volatile than Naked Wines plc. It trades about 0.14 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.22 per unit of risk. If you would invest 107.00 in Vodka Brands Corp on November 2, 2024 and sell it today you would earn a total of 14.00 from holding Vodka Brands Corp or generate 13.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Vodka Brands Corp vs. Naked Wines plc
Performance |
| Timeline |
| Vodka Brands Corp |
| Naked Wines plc |
Vodka Brands and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vodka Brands and Naked Wines
The main advantage of trading using opposite Vodka Brands and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodka Brands 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.| Vodka Brands vs. Brown Forman | Vodka Brands vs. Brown Forman | Vodka Brands vs. Eastside Distilling | Vodka Brands vs. Diageo PLC ADR |
| Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Naked Wines plc | Naked Wines vs. Crimson Wine | 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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