Correlation Between Naked Wines and GungHo Online

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

Diversification Opportunities for Naked Wines and GungHo Online

0.12

Correlation Coefficient

Naked Wines  GungHo Online

Average diversification

The 3 months correlation between Naked and GungHo is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and GungHo Online Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GungHo Online Entert 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 GungHo Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GungHo Online Entert has no effect on the direction of Naked Wines i.e., Naked Wines and GungHo Online go up and down completely randomly.

Pair Corralation between Naked Wines and GungHo Online

Assuming the 90 days horizon Naked Wines plc is expected to generate 17.51 times more return on investment than GungHo Online. However, Naked Wines is 17.51 times more volatile than GungHo Online Entertainment. It trades about 0.11 of its potential returns per unit of risk. GungHo Online Entertainment is currently generating about -0.15 per unit of risk. If you would invest  145.00  in Naked Wines plc on January 24, 2024 and sell it today you would earn a total of  140.00  from holding Naked Wines plc or generate 96.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Naked Wines plc  vs.  GungHo Online Entertainment

Naked Wines plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Naked Wines plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Naked Wines showed solid returns over the last few months and may actually be approaching a breakup point.

GungHo Online Entert

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GungHo Online Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Naked Wines and GungHo Online

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

The idea behind Naked Wines plc and GungHo Online Entertainment 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.