Correlation Between ACDC Metals and Wesfarmers
Can any of the company-specific risk be diversified away by investing in both ACDC Metals and Wesfarmers 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 ACDC Metals and Wesfarmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ACDC Metals and Wesfarmers, you can compare the effects of market volatilities on ACDC Metals and Wesfarmers 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 ACDC Metals with a short position of Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACDC Metals and Wesfarmers.
Diversification Opportunities for ACDC Metals and Wesfarmers
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ACDC and Wesfarmers is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding ACDC Metals and Wesfarmers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers and ACDC Metals 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 ACDC Metals are associated (or correlated) with Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers has no effect on the direction of ACDC Metals i.e., ACDC Metals and Wesfarmers go up and down completely randomly.
Pair Corralation between ACDC Metals and Wesfarmers
Assuming the 90 days trading horizon ACDC Metals is expected to generate 1.2 times less return on investment than Wesfarmers. In addition to that, ACDC Metals is 5.18 times more volatile than Wesfarmers. It trades about 0.04 of its total potential returns per unit of risk. Wesfarmers is currently generating about 0.25 per unit of volatility. If you would invest 6,981 in Wesfarmers on September 15, 2024 and sell it today you would earn a total of 384.00 from holding Wesfarmers or generate 5.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ACDC Metals vs. Wesfarmers
Performance |
| Timeline |
| ACDC Metals |
| Wesfarmers |
ACDC Metals and Wesfarmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ACDC Metals and Wesfarmers
The main advantage of trading using opposite ACDC Metals and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACDC Metals position performs unexpectedly, Wesfarmers 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 Wesfarmers will offset losses from the drop in Wesfarmers' long position.| ACDC Metals vs. Northern Star Resources | ACDC Metals vs. Evolution Mining | ACDC Metals vs. Bluescope Steel | ACDC Metals vs. Sandfire Resources NL |
| Wesfarmers vs. Hutchison Telecommunications | Wesfarmers vs. Collins Foods | Wesfarmers vs. My Foodie Box | Wesfarmers vs. TPG Telecom |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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