Correlation Between Naked Wines and Sage Group
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Sage Group 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 Sage Group 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 Sage Group PLC, you can compare the effects of market volatilities on Naked Wines and Sage Group 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 Sage Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Sage Group.
Diversification Opportunities for Naked Wines and Sage Group
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Naked and Sage is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Sage Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Group 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 Sage Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Group PLC has no effect on the direction of Naked Wines i.e., Naked Wines and Sage Group go up and down completely randomly.
Pair Corralation between Naked Wines and Sage Group
Assuming the 90 days trading horizon Naked Wines plc is expected to under-perform the Sage Group. In addition to that, Naked Wines is 2.4 times more volatile than Sage Group PLC. It trades about -0.04 of its total potential returns per unit of risk. Sage Group PLC is currently generating about 0.08 per unit of volatility. If you would invest 74,148 in Sage Group PLC on October 11, 2024 and sell it today you would earn a total of 56,552 from holding Sage Group PLC or generate 76.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naked Wines plc vs. Sage Group PLC
Performance |
| Timeline |
| Naked Wines plc |
| Sage Group PLC |
Naked Wines and Sage Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Sage Group
The main advantage of trading using opposite Naked Wines and Sage Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Sage Group 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 Sage Group will offset losses from the drop in Sage Group's long position.| Naked Wines vs. PureTech Health plc | Naked Wines vs. Smithson Investment Trust | Naked Wines vs. Concurrent Technologies Plc | Naked Wines vs. Tavistock Investments Plc |
| Sage Group vs. Cornish Metals | Sage Group vs. Zoom Video Communications | Sage Group vs. Naked Wines plc | Sage Group vs. Bisichi Mining 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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