Correlation Between Naked Wines and Direct Line
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Direct Line 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 Direct Line 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 Direct Line Insurance, you can compare the effects of market volatilities on Naked Wines and Direct Line 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 Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Direct Line.
Diversification Opportunities for Naked Wines and Direct Line
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Naked and Direct is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance 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 Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of Naked Wines i.e., Naked Wines and Direct Line go up and down completely randomly.
Pair Corralation between Naked Wines and Direct Line
Assuming the 90 days trading horizon Naked Wines is expected to generate 1.94 times less return on investment than Direct Line. But when comparing it to its historical volatility, Naked Wines plc is 1.33 times less risky than Direct Line. It trades about 0.06 of its potential returns per unit of risk. Direct Line Insurance is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 18,807 in Direct Line Insurance on November 28, 2024 and sell it today you would earn a total of 7,833 from holding Direct Line Insurance or generate 41.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naked Wines plc vs. Direct Line Insurance
Performance |
| Timeline |
| Naked Wines plc |
| Direct Line Insurance |
Naked Wines and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Direct Line
The main advantage of trading using opposite Naked Wines and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| Naked Wines vs. Bellevue Healthcare Trust | Naked Wines vs. Optima Health plc | Naked Wines vs. Cardinal Health | Naked Wines vs. Invesco Physical Silver |
| Direct Line vs. Heavitree Brewery | Direct Line vs. Air Products Chemicals | Direct Line vs. Ryanair Holdings plc | Direct Line vs. Zoom Video Communications |
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.
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like |