Correlation Between Naked Wines and NanoTech Gaming

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

Diversification Opportunities for Naked Wines and NanoTech Gaming

0.0

Correlation Coefficient

Naked Wines  NanoTech Gaming

Pay attention - limited upside

The 3 months correlation between Naked and NanoTech is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and NanoTech Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NanoTech Gaming 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 NanoTech Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NanoTech Gaming has no effect on the direction of Naked Wines i.e., Naked Wines and NanoTech Gaming go up and down completely randomly.

Pair Corralation between Naked Wines and NanoTech Gaming

Assuming the 90 days horizon Naked Wines is expected to generate 7.92 times less return on investment than NanoTech Gaming. But when comparing it to its historical volatility, Naked Wines plc is 7.58 times less risky than NanoTech Gaming. It trades about 0.05 of its potential returns per unit of risk. NanoTech Gaming is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.01  in NanoTech Gaming on October 1, 2024 and sell it today you would earn a total of  0.00  from holding NanoTech Gaming or generate 0.0% return on investment over 90 days.

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

Naked Wines plc  vs.  NanoTech Gaming

Naked Wines plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

NanoTech Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NanoTech Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, NanoTech Gaming is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Naked Wines and NanoTech Gaming

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

The idea behind Naked Wines plc and NanoTech Gaming 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.