Correlation Between Naked Wines and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Applied Materials 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 Applied Materials 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 Applied Materials, you can compare the effects of market volatilities on Naked Wines and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Applied Materials.
Diversification Opportunities for Naked Wines and Applied Materials
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Naked and Applied is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Naked Wines i.e., Naked Wines and Applied Materials go up and down completely randomly.
Pair Corralation between Naked Wines and Applied Materials
Assuming the 90 days trading horizon Naked Wines is expected to generate 8.99 times less return on investment than Applied Materials. In addition to that, Naked Wines is 1.35 times more volatile than Applied Materials. It trades about 0.02 of its total potential returns per unit of risk. Applied Materials is currently generating about 0.26 per unit of volatility. If you would invest 16,677 in Applied Materials on October 28, 2024 and sell it today you would earn a total of 2,335 from holding Applied Materials or generate 14.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naked Wines plc vs. Applied Materials
Performance |
| Timeline |
| Naked Wines plc |
| Applied Materials |
Naked Wines and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Applied Materials
The main advantage of trading using opposite Naked Wines and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Naked Wines vs. Samsung Electronics Co | Naked Wines vs. Samsung Electronics Co | Naked Wines vs. Toyota Motor Corp | Naked Wines vs. MOL Hungarian Oil |
| Applied Materials vs. Fresenius Medical Care | Applied Materials vs. Creo Medical Group | Applied Materials vs. Medical Properties Trust | Applied Materials vs. AMG Advanced Metallurgical |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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