Correlation Between Naked Wines and SNDL

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

Diversification Opportunities for Naked Wines and SNDL

-0.18

Correlation Coefficient

Naked Wines  SNDL

Good diversification

The 3 months correlation between Naked and SNDL is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc 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 SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Naked Wines i.e., Naked Wines and SNDL go up and down completely randomly.

Pair Corralation between Naked Wines and SNDL

Assuming the 90 days horizon Naked Wines plc is expected to under-perform the SNDL. But the pink sheet apears to be less risky and, when comparing its historical volatility, Naked Wines plc is 2.17 times less risky than SNDL. The pink sheet trades about -0.05 of its potential returns per unit of risk. The SNDL Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  197.00  in SNDL Inc on September 1, 2024 and sell it today you would lose (4.00) from holding SNDL Inc or give up 2.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Naked Wines plc  vs.  SNDL Inc

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.

SNDL Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Naked Wines and SNDL

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

The idea behind Naked Wines plc and SNDL Inc 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.