Correlation Between Willamette Valley and Naked Wines
Can any of the company-specific risk be diversified away by investing in both Willamette Valley and Naked Wines 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 Willamette Valley and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Willamette Valley Vineyards and Naked Wines plc, you can compare the effects of market volatilities on Willamette Valley and Naked Wines 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 Willamette Valley with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and Naked Wines.
Diversification Opportunities for Willamette Valley and Naked Wines
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Willamette and Naked is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines plc and Willamette Valley 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 Willamette Valley Vineyards are associated (or correlated) with Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of Willamette Valley i.e., Willamette Valley and Naked Wines go up and down completely randomly.
Pair Corralation between Willamette Valley and Naked Wines
Assuming the 90 days horizon Willamette Valley Vineyards is expected to under-perform the Naked Wines. But the preferred stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 2.57 times less risky than Naked Wines. The preferred stock trades about -0.01 of its potential returns per unit of risk. The Naked Wines plc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 81.00 in Naked Wines plc on August 28, 2024 and sell it today you would lose (15.00) from holding Naked Wines plc or give up 18.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.52% |
| Values | Daily Returns |
Willamette Valley Vineyards vs. Naked Wines plc
Performance |
| Timeline |
| Willamette Valley |
| Naked Wines plc |
Willamette Valley and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Willamette Valley and Naked Wines
The main advantage of trading using opposite Willamette Valley and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley position performs unexpectedly, Naked Wines 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 Naked Wines will offset losses from the drop in Naked Wines' long position.| Willamette Valley vs. Naked Wines plc | Willamette Valley vs. Pernod Ricard SA | Willamette Valley vs. Brown Forman | Willamette Valley vs. Treasury Wine Estates |
| Naked Wines vs. Diageo PLC ADR | Naked Wines vs. Constellation Brands Class | Naked Wines vs. Morningstar Unconstrained Allocation | Naked Wines vs. SEI Investments |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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