Correlation Between Coles and Seven West
Can any of the company-specific risk be diversified away by investing in both Coles and Seven West 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 Seven West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coles Group and Seven West Media, you can compare the effects of market volatilities on Coles and Seven West 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 Seven West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coles and Seven West.
Diversification Opportunities for Coles and Seven West
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coles and Seven is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Coles Group and Seven West Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven West Media 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 Seven West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven West Media has no effect on the direction of Coles i.e., Coles and Seven West go up and down completely randomly.
Pair Corralation between Coles and Seven West
Assuming the 90 days trading horizon Coles is expected to generate 7.61 times less return on investment than Seven West. But when comparing it to its historical volatility, Coles Group is 7.89 times less risky than Seven West. It trades about 0.15 of its potential returns per unit of risk. Seven West Media is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 16.00 in Seven West Media on November 27, 2024 and sell it today you would earn a total of 2.00 from holding Seven West Media or generate 12.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coles Group vs. Seven West Media
Performance |
| Timeline |
| Coles Group |
| Seven West Media |
Coles and Seven West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coles and Seven West
The main advantage of trading using opposite Coles and Seven West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coles position performs unexpectedly, Seven West 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 Seven West will offset losses from the drop in Seven West's long position.| Coles vs. Hutchison Telecommunications | Coles vs. MetalsGrove Mining | Coles vs. Galena Mining | Coles vs. Saferoads Holdings |
| Seven West vs. Australian Agricultural | Seven West vs. Super Retail Group | Seven West vs. BKI Investment | Seven West vs. Auctus Alternative 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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