Correlation Between Naked Wines and RTW Venture
Can any of the company-specific risk be diversified away by investing in both Naked Wines and RTW Venture 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 RTW Venture 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 RTW Venture Fund, you can compare the effects of market volatilities on Naked Wines and RTW Venture 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 RTW Venture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and RTW Venture.
Diversification Opportunities for Naked Wines and RTW Venture
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Naked and RTW is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and RTW Venture Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTW Venture Fund 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 RTW Venture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTW Venture Fund has no effect on the direction of Naked Wines i.e., Naked Wines and RTW Venture go up and down completely randomly.
Pair Corralation between Naked Wines and RTW Venture
Assuming the 90 days trading horizon Naked Wines plc is expected to generate 2.14 times more return on investment than RTW Venture. However, Naked Wines is 2.14 times more volatile than RTW Venture Fund. It trades about 0.05 of its potential returns per unit of risk. RTW Venture Fund is currently generating about 0.06 per unit of risk. If you would invest 3,965 in Naked Wines plc on September 4, 2024 and sell it today you would earn a total of 1,190 from holding Naked Wines plc or generate 30.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naked Wines plc vs. RTW Venture Fund
Performance |
| Timeline |
| Naked Wines plc |
| RTW Venture Fund |
Naked Wines and RTW Venture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and RTW Venture
The main advantage of trading using opposite Naked Wines and RTW Venture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, RTW Venture 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 RTW Venture will offset losses from the drop in RTW Venture's long position.| Naked Wines vs. Ecclesiastical Insurance Office | Naked Wines vs. Dentsply Sirona | Naked Wines vs. Foresight Environmental Infrastructure | Naked Wines vs. Beazer Homes USA |
| RTW Venture vs. Naked Wines plc | RTW Venture vs. LPKF Laser Electronics | RTW Venture vs. British American Tobacco | RTW Venture vs. BW Offshore |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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