Correlation Between United Parks and Naked Wines

Can any of the company-specific risk be diversified away by investing in both United Parks and Naked Wines 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 United Parks and Naked Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Parks Resorts and Naked Wines plc, you can compare the effects of market volatilities on United Parks and Naked Wines 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 United Parks with a short position of Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parks and Naked Wines.

Diversification Opportunities for United Parks and Naked Wines

0.58

Correlation Coefficient

United Parks  Naked Wines

Very weak diversification

The 3 months correlation between United and Naked is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding United Parks Resorts and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines plc and United Parks 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 United Parks Resorts are associated (or correlated) with Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of United Parks i.e., United Parks and Naked Wines go up and down completely randomly.

Pair Corralation between United Parks and Naked Wines

Given the investment horizon of 90 days United Parks Resorts is expected to generate 22.56 times more return on investment than Naked Wines. However, United Parks is 22.56 times more volatile than Naked Wines plc. It trades about 0.0 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.21 per unit of risk. If you would invest  5,687  in United Parks Resorts on September 13, 2024 and sell it today you would lose (22.00) from holding United Parks Resorts or give up 0.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

United Parks Resorts  vs.  Naked Wines plc

United Parks Resorts

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Parks Resorts are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, United Parks may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with United Parks and Naked Wines

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

The idea behind United Parks Resorts and Naked Wines plc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.