Correlation Between Naked Wines and Capital Drilling
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Capital Drilling 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 Capital Drilling 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 Capital Drilling, you can compare the effects of market volatilities on Naked Wines and Capital Drilling 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 Capital Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Capital Drilling.
Diversification Opportunities for Naked Wines and Capital Drilling
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Naked and Capital is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Naked Wines i.e., Naked Wines and Capital Drilling go up and down completely randomly.
Pair Corralation between Naked Wines and Capital Drilling
Assuming the 90 days trading horizon Naked Wines plc is expected to generate 1.79 times more return on investment than Capital Drilling. However, Naked Wines is 1.79 times more volatile than Capital Drilling. It trades about 0.0 of its potential returns per unit of risk. Capital Drilling is currently generating about -0.02 per unit of risk. If you would invest 9,445 in Naked Wines plc on November 30, 2024 and sell it today you would lose (2,625) from holding Naked Wines plc or give up 27.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naked Wines plc vs. Capital Drilling
Performance |
| Timeline |
| Naked Wines plc |
| Capital Drilling |
Naked Wines and Capital Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Capital Drilling
The main advantage of trading using opposite Naked Wines and Capital Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Capital Drilling 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 Capital Drilling will offset losses from the drop in Capital Drilling's long position.| Naked Wines vs. JD Sports Fashion | Naked Wines vs. Catalyst Media Group | Naked Wines vs. Liontrust Asset Management | Naked Wines vs. Impax Asset Management |
| Capital Drilling vs. Molson Coors Beverage | Capital Drilling vs. Naked Wines plc | Capital Drilling vs. Micron Technology | Capital Drilling vs. Logitech International SA |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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