Correlation Between Naked Wines and VeriSign
Can any of the company-specific risk be diversified away by investing in both Naked Wines and VeriSign 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 Naked Wines and VeriSign into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Naked Wines plc and VeriSign, you can compare the effects of market volatilities on Naked Wines and VeriSign 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 Naked Wines with a short position of VeriSign. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and VeriSign.
Diversification Opportunities for Naked Wines and VeriSign
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Naked and VeriSign is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and VeriSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeriSign and Naked Wines 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 Naked Wines plc are associated (or correlated) with VeriSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeriSign has no effect on the direction of Naked Wines i.e., Naked Wines and VeriSign go up and down completely randomly.
Pair Corralation between Naked Wines and VeriSign
Assuming the 90 days trading horizon Naked Wines plc is expected to under-perform the VeriSign. In addition to that, Naked Wines is 4.07 times more volatile than VeriSign. It trades about -0.02 of its total potential returns per unit of risk. VeriSign is currently generating about 0.37 per unit of volatility. If you would invest 19,911 in VeriSign on October 23, 2024 and sell it today you would earn a total of 1,145 from holding VeriSign or generate 5.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 89.47% |
| Values | Daily Returns |
Naked Wines plc vs. VeriSign
Performance |
| Timeline |
| Naked Wines plc |
| VeriSign |
Naked Wines and VeriSign Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and VeriSign
The main advantage of trading using opposite Naked Wines and VeriSign positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, VeriSign 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 VeriSign will offset losses from the drop in VeriSign's long position.| Naked Wines vs. National Atomic Co | Naked Wines vs. Flutter Entertainment PLC | Naked Wines vs. Ferguson Plc | Naked Wines vs. Marwyn Value Investors |
| VeriSign vs. Dairy Farm International | VeriSign vs. Naked Wines plc | VeriSign vs. Associated British Foods | VeriSign vs. Westlake Chemical Corp |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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