Correlation Between Coles and Flagship Investments
Can any of the company-specific risk be diversified away by investing in both Coles and Flagship Investments 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 Coles and Flagship Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coles Group and Flagship Investments, you can compare the effects of market volatilities on Coles and Flagship Investments 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 Coles with a short position of Flagship Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coles and Flagship Investments.
Diversification Opportunities for Coles and Flagship Investments
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Coles and Flagship is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Coles Group and Flagship Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flagship Investments and Coles 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 Coles Group are associated (or correlated) with Flagship Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flagship Investments has no effect on the direction of Coles i.e., Coles and Flagship Investments go up and down completely randomly.
Pair Corralation between Coles and Flagship Investments
Assuming the 90 days trading horizon Coles is expected to generate 1.34 times less return on investment than Flagship Investments. But when comparing it to its historical volatility, Coles Group is 1.85 times less risky than Flagship Investments. It trades about 0.13 of its potential returns per unit of risk. Flagship Investments is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 182.00 in Flagship Investments on September 2, 2024 and sell it today you would earn a total of 33.00 from holding Flagship Investments or generate 18.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coles Group vs. Flagship Investments
Performance |
| Timeline |
| Coles Group |
| Flagship Investments |
Coles and Flagship Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coles and Flagship Investments
The main advantage of trading using opposite Coles and Flagship Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coles position performs unexpectedly, Flagship Investments 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 Flagship Investments will offset losses from the drop in Flagship Investments' long position.| Coles vs. Australian Unity Office | Coles vs. Centuria Industrial Reit | Coles vs. Hawsons Iron | Coles vs. Centaurus Metals |
| Flagship Investments vs. Lendlease Group | Flagship Investments vs. Hutchison Telecommunications | Flagship Investments vs. BSP Financial Group | Flagship Investments vs. National Australia Bank |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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