Correlation Between Naked Wines and Consol Energy

Can any of the company-specific risk be diversified away by investing in both Naked Wines and Consol Energy 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 Consol Energy 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 Consol Energy, you can compare the effects of market volatilities on Naked Wines and Consol Energy 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 Consol Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Consol Energy.

Diversification Opportunities for Naked Wines and Consol Energy

0.64

Correlation Coefficient

Naked Wines  Consol Energy

Poor diversification

The 3 months correlation between Naked and Consol is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Consol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consol Energy 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 Consol Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consol Energy has no effect on the direction of Naked Wines i.e., Naked Wines and Consol Energy go up and down completely randomly.

Pair Corralation between Naked Wines and Consol Energy

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the Consol Energy. In addition to that, Naked Wines is 2.56 times more volatile than Consol Energy. It trades about 0.0 of its total potential returns per unit of risk. Consol Energy is currently generating about 0.06 per unit of volatility. If you would invest  5,588  in Consol Energy on September 23, 2024 and sell it today you would earn a total of  4,781  from holding Consol Energy or generate 85.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Naked Wines plc  vs.  Consol Energy

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 fairly strong basic indicators, Naked Wines is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Consol Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Consol Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Consol Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Naked Wines and Consol Energy

The main advantage of trading using opposite Naked Wines and Consol Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Consol Energy 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 Consol Energy will offset losses from the drop in Consol Energy's long position.

The idea behind Naked Wines plc and Consol Energy 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 Global Correlations module to find global opportunities by holding instruments from different markets.