Correlation Between Impax Asset and Naked Wines

Can any of the company-specific risk be diversified away by investing in both Impax Asset 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 Impax Asset and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Impax Asset Management and Naked Wines plc, you can compare the effects of market volatilities on Impax Asset 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 Impax Asset with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Impax Asset and Naked Wines.

Diversification Opportunities for Impax Asset and Naked Wines

0.73

Correlation Coefficient

Impax Asset  Naked Wines

Poor diversification

The 3 months correlation between Impax and Naked is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Impax Asset Management 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 Impax Asset 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 Impax Asset Management 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 Impax Asset i.e., Impax Asset and Naked Wines go up and down completely randomly.

Pair Corralation between Impax Asset and Naked Wines

Assuming the 90 days trading horizon Impax Asset Management is expected to under-perform the Naked Wines. In addition to that, Impax Asset is 1.49 times more volatile than Naked Wines plc. It trades about -0.16 of its total potential returns per unit of risk. Naked Wines plc is currently generating about -0.01 per unit of volatility. If you would invest  4,980  in Naked Wines plc on September 23, 2024 and sell it today you would lose (175.00) from holding Naked Wines plc or give up 3.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Impax Asset Management  vs.  Naked Wines plc

Impax Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impax Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Naked Wines plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Naked Wines plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Naked Wines is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Impax Asset and Naked Wines

The main advantage of trading using opposite Impax Asset and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Impax Asset 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.

The idea behind Impax Asset Management and Naked Wines plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.