Correlation Between Naked Wines and Griffon

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

Diversification Opportunities for Naked Wines and Griffon

0.57

Correlation Coefficient

Naked Wines  Griffon

Very weak diversification

The 3 months correlation between Naked and Griffon is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon 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 Griffon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Griffon has no effect on the direction of Naked Wines i.e., Naked Wines and Griffon go up and down completely randomly.

Pair Corralation between Naked Wines and Griffon

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the Griffon. But the pink sheet apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 2.05 times less risky than Griffon. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Griffon is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,978  in Griffon on September 23, 2024 and sell it today you would earn a total of  306.00  from holding Griffon or generate 4.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Naked Wines plc  vs.  Griffon

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.

Griffon

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Griffon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Naked Wines and Griffon

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

The idea behind Naked Wines plc and Griffon 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.