Correlation Between Naked Wines and Viking

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

Diversification Opportunities for Naked Wines and Viking

-0.15

Correlation Coefficient

Naked Wines  Viking

Good diversification

The 3 months correlation between Naked and Viking is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Viking Cruises Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viking Cruises 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 Viking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viking Cruises has no effect on the direction of Naked Wines i.e., Naked Wines and Viking go up and down completely randomly.

Pair Corralation between Naked Wines and Viking

Assuming the 90 days horizon Naked Wines plc is expected to generate 0.81 times more return on investment than Viking. However, Naked Wines plc is 1.24 times less risky than Viking. It trades about -0.05 of its potential returns per unit of risk. Viking Cruises Ltd is currently generating about -0.14 per unit of risk. If you would invest  286.00  in Naked Wines plc on September 5, 2024 and sell it today you would lose (15.00) from holding Naked Wines plc or give up 5.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.5%
Values	Daily Returns

Naked Wines plc  vs.  Viking Cruises Ltd

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.

Viking Cruises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viking Cruises Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for Viking Cruises Ltd investors.

Pair Trading with Naked Wines and Viking

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

The idea behind Naked Wines plc and Viking Cruises Ltd 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.