Correlation Between Naked Wines and AJ Bell
Can any of the company-specific risk be diversified away by investing in both Naked Wines and AJ Bell 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 AJ Bell 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 AJ Bell plc, you can compare the effects of market volatilities on Naked Wines and AJ Bell 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 AJ Bell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and AJ Bell.
Diversification Opportunities for Naked Wines and AJ Bell
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Naked and AJB is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and AJ Bell plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AJ Bell plc 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 AJ Bell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AJ Bell plc has no effect on the direction of Naked Wines i.e., Naked Wines and AJ Bell go up and down completely randomly.
Pair Corralation between Naked Wines and AJ Bell
Assuming the 90 days trading horizon Naked Wines plc is expected to generate 1.73 times more return on investment than AJ Bell. However, Naked Wines is 1.73 times more volatile than AJ Bell plc. It trades about 0.18 of its potential returns per unit of risk. AJ Bell plc is currently generating about 0.06 per unit of risk. If you would invest 4,773 in Naked Wines plc on November 4, 2024 and sell it today you would earn a total of 727.00 from holding Naked Wines plc or generate 15.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naked Wines plc vs. AJ Bell plc
Performance |
| Timeline |
| Naked Wines plc |
| AJ Bell plc |
Naked Wines and AJ Bell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and AJ Bell
The main advantage of trading using opposite Naked Wines and AJ Bell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, AJ Bell 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 AJ Bell will offset losses from the drop in AJ Bell's long position.| Naked Wines vs. Flow Traders NV | Naked Wines vs. Sunny Optical Technology | Naked Wines vs. Pfeiffer Vacuum Technology | Naked Wines vs. Qurate Retail Series |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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