Correlation Between Naked Wines and Duckhorn Portfolio

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

Diversification Opportunities for Naked Wines and Duckhorn Portfolio

0.07

Correlation Coefficient

Naked Wines  Duckhorn Portfolio

Significant diversification

The 3 months correlation between Naked and Duckhorn is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Duckhorn Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duckhorn Portfolio 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 Duckhorn Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duckhorn Portfolio has no effect on the direction of Naked Wines i.e., Naked Wines and Duckhorn Portfolio go up and down completely randomly.

Pair Corralation between Naked Wines and Duckhorn Portfolio

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the Duckhorn Portfolio. But the pink sheet apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 8.9 times less risky than Duckhorn Portfolio. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Duckhorn Portfolio is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  570.00  in Duckhorn Portfolio on September 20, 2024 and sell it today you would earn a total of  539.00  from holding Duckhorn Portfolio or generate 94.56% return on investment over 90 days.

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

Naked Wines plc  vs.  Duckhorn Portfolio

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 current stock price disturbance, may contribute to short-term losses for the investors.

Duckhorn Portfolio

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Duckhorn Portfolio are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Duckhorn Portfolio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Naked Wines and Duckhorn Portfolio

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

The idea behind Naked Wines plc and Duckhorn Portfolio 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.