Correlation Between Coles and Suncorp
Can any of the company-specific risk be diversified away by investing in both Coles and Suncorp 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 Suncorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coles Group and Suncorp Group, you can compare the effects of market volatilities on Coles and Suncorp 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 Suncorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coles and Suncorp.
Diversification Opportunities for Coles and Suncorp
Poor diversification
The 3 months correlation between Coles and Suncorp is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Coles Group and Suncorp Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suncorp Group 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 Suncorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suncorp Group has no effect on the direction of Coles i.e., Coles and Suncorp go up and down completely randomly.
Pair Corralation between Coles and Suncorp
Assuming the 90 days trading horizon Coles Group is expected to generate 0.54 times more return on investment than Suncorp. However, Coles Group is 1.84 times less risky than Suncorp. It trades about 0.22 of its potential returns per unit of risk. Suncorp Group is currently generating about -0.05 per unit of risk. If you would invest 1,816 in Coles Group on September 25, 2024 and sell it today you would earn a total of 62.00 from holding Coles Group or generate 3.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Coles Group vs. Suncorp Group
Performance |
| Timeline |
| Coles Group |
| Suncorp Group |
Coles and Suncorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coles and Suncorp
The main advantage of trading using opposite Coles and Suncorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coles position performs unexpectedly, Suncorp 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 Suncorp will offset losses from the drop in Suncorp's long position.| Coles vs. Accent Resources NL | Coles vs. Hutchison Telecommunications | Coles vs. Energy Resources | Coles vs. GO2 People |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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