Correlation Between Naked Wines and Ebro Foods
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Ebro Foods 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 Ebro Foods 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 Ebro Foods, you can compare the effects of market volatilities on Naked Wines and Ebro Foods 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 Ebro Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Ebro Foods.
Diversification Opportunities for Naked Wines and Ebro Foods
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Naked and Ebro is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Ebro Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods 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 Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods has no effect on the direction of Naked Wines i.e., Naked Wines and Ebro Foods go up and down completely randomly.
Pair Corralation between Naked Wines and Ebro Foods
Assuming the 90 days trading horizon Naked Wines plc is expected to under-perform the Ebro Foods. In addition to that, Naked Wines is 6.52 times more volatile than Ebro Foods. It trades about -0.05 of its total potential returns per unit of risk. Ebro Foods is currently generating about -0.03 per unit of volatility. If you would invest 1,586 in Ebro Foods on October 20, 2024 and sell it today you would lose (5.00) from holding Ebro Foods or give up 0.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naked Wines plc vs. Ebro Foods
Performance |
| Timeline |
| Naked Wines plc |
| Ebro Foods |
Naked Wines and Ebro Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Ebro Foods
The main advantage of trading using opposite Naked Wines and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Ebro Foods 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 Ebro Foods will offset losses from the drop in Ebro Foods' long position.| Naked Wines vs. Samsung Electronics Co | Naked Wines vs. Samsung Electronics Co | Naked Wines vs. Toyota Motor Corp | Naked Wines vs. Reliance Industries Ltd |
| Ebro Foods vs. Xeros Technology Group | Ebro Foods vs. Alfa Financial Software | Ebro Foods vs. Axway Software SA | Ebro Foods vs. Taiwan Semiconductor Manufacturing |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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