Correlation Between Coles and Nsx
Can any of the company-specific risk be diversified away by investing in both Coles and Nsx 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 Nsx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coles Group and Nsx, you can compare the effects of market volatilities on Coles and Nsx 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 Nsx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coles and Nsx.
Diversification Opportunities for Coles and Nsx
Excellent diversification
The 3 months correlation between Coles and Nsx is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Coles Group and Nsx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nsx 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 Nsx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nsx has no effect on the direction of Coles i.e., Coles and Nsx go up and down completely randomly.
Pair Corralation between Coles and Nsx
Assuming the 90 days trading horizon Coles Group is expected to generate 0.1 times more return on investment than Nsx. However, Coles Group is 10.27 times less risky than Nsx. It trades about 0.38 of its potential returns per unit of risk. Nsx is currently generating about -0.05 per unit of risk. If you would invest 1,774 in Coles Group on September 12, 2024 and sell it today you would earn a total of 127.00 from holding Coles Group or generate 7.16% 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. Nsx
Performance |
| Timeline |
| Coles Group |
| Nsx |
Coles and Nsx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coles and Nsx
The main advantage of trading using opposite Coles and Nsx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coles position performs unexpectedly, Nsx 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 Nsx will offset losses from the drop in Nsx's long position.The idea behind Coles Group and Nsx 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.| Nsx vs. Oneview Healthcare PLC | Nsx vs. Ramsay Health Care | Nsx vs. Truscott Mining Corp | Nsx vs. BTC Health Limited |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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