Correlation Between Radcom and Naked Wines

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

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

Diversification Opportunities for Radcom and Naked Wines

-0.02

Correlation Coefficient

Radcom  Naked Wines

Good diversification

The 3 months correlation between Radcom and Naked is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Radcom 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 Radcom 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 Radcom 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 Radcom i.e., Radcom and Naked Wines go up and down completely randomly.

Pair Corralation between Radcom and Naked Wines

Given the investment horizon of 90 days Radcom is expected to generate 2.29 times more return on investment than Naked Wines. However, Radcom is 2.29 times more volatile than Naked Wines plc. It trades about 0.12 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.05 per unit of risk. If you would invest  947.00  in Radcom on September 5, 2024 and sell it today you would earn a total of  242.00  from holding Radcom or generate 25.55% return on investment over 90 days.

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

Radcom  vs.  Naked Wines plc

Radcom

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Radcom and Naked Wines

The main advantage of trading using opposite Radcom and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radcom 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 Radcom 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.