Correlation Between Safety Shot and Naked Wines

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

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

Diversification Opportunities for Safety Shot and Naked Wines

-0.36

Correlation Coefficient

Safety Shot  Naked Wines

Very good diversification

The 3 months correlation between Safety and Naked is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Safety Shot 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 Safety Shot 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 Safety Shot 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 Safety Shot i.e., Safety Shot and Naked Wines go up and down completely randomly.

Pair Corralation between Safety Shot and Naked Wines

Given the investment horizon of 90 days Safety Shot is expected to under-perform the Naked Wines. In addition to that, Safety Shot is 3.24 times more volatile than Naked Wines plc. It trades about -0.15 of its total potential returns per unit of risk. Naked Wines plc is currently generating about -0.05 per unit of volatility. If you would invest  270.00  in Naked Wines plc on September 22, 2024 and sell it today you would lose (15.00) from holding Naked Wines plc or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Safety Shot  vs.  Naked Wines plc

Safety Shot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safety Shot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 Safety Shot and Naked Wines

The main advantage of trading using opposite Safety Shot and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Shot 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 Safety Shot 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.