Correlation Between Wesfarmers and Coles
Can any of the company-specific risk be diversified away by investing in both Wesfarmers and Coles 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 Wesfarmers and Coles into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers and Coles Group, you can compare the effects of market volatilities on Wesfarmers and Coles 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 Wesfarmers with a short position of Coles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and Coles.
Diversification Opportunities for Wesfarmers and Coles
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wesfarmers and Coles is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and Coles Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coles Group and Wesfarmers 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 Wesfarmers are associated (or correlated) with Coles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coles Group has no effect on the direction of Wesfarmers i.e., Wesfarmers and Coles go up and down completely randomly.
Pair Corralation between Wesfarmers and Coles
Assuming the 90 days trading horizon Wesfarmers is expected to generate 1.58 times more return on investment than Coles. However, Wesfarmers is 1.58 times more volatile than Coles Group. It trades about 0.13 of its potential returns per unit of risk. Coles Group is currently generating about 0.16 per unit of risk. If you would invest 6,349 in Wesfarmers on July 2, 2024 and sell it today you would earn a total of 719.00 from holding Wesfarmers or generate 11.32% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Wesfarmers vs. Coles Group
Performance |
Timeline |
Wesfarmers |
Coles Group |
Wesfarmers and Coles Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Wesfarmers and Coles
The main advantage of trading using opposite Wesfarmers and Coles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers position performs unexpectedly, Coles 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 Coles will offset losses from the drop in Coles' long position.Wesfarmers vs. Advanced Health Intelligence | Wesfarmers vs. Macquarie Bank Limited | Wesfarmers vs. Oneview Healthcare PLC | Wesfarmers vs. Austco Healthcare |
Coles vs. Pinnacle Investment Management | Coles vs. Mirrabooka Investments | Coles vs. Charter Hall Education | Coles vs. Hotel Property Investments |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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