Correlation Between Naked Wines and Sherborne Investors
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Sherborne Investors 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 Sherborne Investors 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 Sherborne Investors Guernsey, you can compare the effects of market volatilities on Naked Wines and Sherborne Investors 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 Sherborne Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Sherborne Investors.
Diversification Opportunities for Naked Wines and Sherborne Investors
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Naked and Sherborne is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Sherborne Investors Guernsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherborne Investors 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 Sherborne Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sherborne Investors has no effect on the direction of Naked Wines i.e., Naked Wines and Sherborne Investors go up and down completely randomly.
Pair Corralation between Naked Wines and Sherborne Investors
Assuming the 90 days trading horizon Naked Wines plc is expected to under-perform the Sherborne Investors. In addition to that, Naked Wines is 3.16 times more volatile than Sherborne Investors Guernsey. It trades about -0.06 of its total potential returns per unit of risk. Sherborne Investors Guernsey is currently generating about -0.05 per unit of volatility. If you would invest 5,325 in Sherborne Investors Guernsey on September 13, 2024 and sell it today you would lose (50.00) from holding Sherborne Investors Guernsey or give up 0.94% 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. Sherborne Investors Guernsey
Performance |
| Timeline |
| Naked Wines plc |
| Sherborne Investors |
Naked Wines and Sherborne Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Sherborne Investors
The main advantage of trading using opposite Naked Wines and Sherborne Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Sherborne Investors 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 Sherborne Investors will offset losses from the drop in Sherborne Investors' long position.| Naked Wines vs. Ondine Biomedical | Naked Wines vs. Europa Metals | Naked Wines vs. Revolution Beauty Group | Naked Wines vs. Moonpig Group PLC |
| Sherborne Investors vs. Lindsell Train Investment | Sherborne Investors vs. Fidelity National Information | Sherborne Investors vs. Roadside Real Estate | Sherborne Investors vs. GlobalData 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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