Correlation Between NAKED WINES and CIFI Holdings

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

Diversification Opportunities for NAKED WINES and CIFI Holdings

0.35

Correlation Coefficient

NAKED WINES  CIFI Holdings

Weak diversification

The 3 months correlation between NAKED and CIFI is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding NAKED WINES PLC and CIFI Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIFI Holdings 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 CIFI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIFI Holdings has no effect on the direction of NAKED WINES i.e., NAKED WINES and CIFI Holdings go up and down completely randomly.

Pair Corralation between NAKED WINES and CIFI Holdings

Assuming the 90 days horizon NAKED WINES PLC is expected to under-perform the CIFI Holdings. But the stock apears to be less risky and, when comparing its historical volatility, NAKED WINES PLC is 3.56 times less risky than CIFI Holdings. The stock trades about -0.04 of its potential returns per unit of risk. The CIFI Holdings Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.65  in CIFI Holdings Co on September 26, 2024 and sell it today you would earn a total of  0.50  from holding CIFI Holdings Co or generate 18.87% return on investment over 90 days.

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

NAKED WINES PLC  vs.  CIFI Holdings Co

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. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CIFI Holdings

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days CIFI Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, CIFI Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NAKED WINES and CIFI Holdings

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

The idea behind NAKED WINES PLC and CIFI Holdings Co 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.