Correlation Between Naked Wines and Sunny Optical
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Sunny Optical 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 Sunny Optical 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 Sunny Optical Technology, you can compare the effects of market volatilities on Naked Wines and Sunny Optical 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 Sunny Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Sunny Optical.
Diversification Opportunities for Naked Wines and Sunny Optical
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Naked and Sunny is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Sunny Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Optical Technology 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 Sunny Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Optical Technology has no effect on the direction of Naked Wines i.e., Naked Wines and Sunny Optical go up and down completely randomly.
Pair Corralation between Naked Wines and Sunny Optical
Assuming the 90 days trading horizon Naked Wines plc is expected to under-perform the Sunny Optical. But the stock apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 1.15 times less risky than Sunny Optical. The stock trades about -0.04 of its potential returns per unit of risk. The Sunny Optical Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 7,020 in Sunny Optical Technology on October 30, 2024 and sell it today you would lose (15.00) from holding Sunny Optical Technology or give up 0.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naked Wines plc vs. Sunny Optical Technology
Performance |
| Timeline |
| Naked Wines plc |
| Sunny Optical Technology |
Naked Wines and Sunny Optical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Sunny Optical
The main advantage of trading using opposite Naked Wines and Sunny Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Sunny Optical 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 Sunny Optical will offset losses from the drop in Sunny Optical's long position.| Naked Wines vs. Erste Group Bank | Naked Wines vs. First Class Metals | Naked Wines vs. Bankers Investment Trust | Naked Wines vs. Europa Metals |
| Sunny Optical vs. Young Cos Brewery | Sunny Optical vs. Griffin Mining | Sunny Optical vs. Beowulf Mining | Sunny Optical vs. Fevertree Drinks Plc |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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