Correlation Between Naked Wines and TOYOTA

Can any of the company-specific risk be diversified away by investing in both Naked Wines and TOYOTA 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 TOYOTA 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 TOYOTA 455 20 SEP 27, you can compare the effects of market volatilities on Naked Wines and TOYOTA 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 TOYOTA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and TOYOTA.

Diversification Opportunities for Naked Wines and TOYOTA

-0.02

Correlation Coefficient

Naked Wines  TOYOTA

Good diversification

The 3 months correlation between Naked and TOYOTA is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and TOYOTA 455 20 SEP 27 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOYOTA 455 20 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 TOYOTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOYOTA 455 20 has no effect on the direction of Naked Wines i.e., Naked Wines and TOYOTA go up and down completely randomly.

Pair Corralation between Naked Wines and TOYOTA

Assuming the 90 days horizon Naked Wines plc is expected to generate 3.91 times more return on investment than TOYOTA. However, Naked Wines is 3.91 times more volatile than TOYOTA 455 20 SEP 27. It trades about 0.01 of its potential returns per unit of risk. TOYOTA 455 20 SEP 27 is currently generating about -0.04 per unit of risk. If you would invest  270.00  in Naked Wines plc on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Naked Wines plc or generate 0.0% return on investment over 90 days.

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

Naked Wines plc  vs.  TOYOTA 455 20 SEP 27

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.

TOYOTA 455 20

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOYOTA 455 20 SEP 27 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TOYOTA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Naked Wines and TOYOTA

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

The idea behind Naked Wines plc and TOYOTA 455 20 SEP 27 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 Transaction History module to view history of all your transactions and understand their impact on performance.