Correlation Between Loblaw Companies and Woolworths Group
Can any of the company-specific risk be diversified away by investing in both Loblaw Companies and Woolworths Group 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 Loblaw Companies and Woolworths Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loblaw Companies Limited and Woolworths Group Limited, you can compare the effects of market volatilities on Loblaw Companies and Woolworths Group 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 Loblaw Companies with a short position of Woolworths Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loblaw Companies and Woolworths Group.
Diversification Opportunities for Loblaw Companies and Woolworths Group
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Loblaw and Woolworths is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Loblaw Companies Limited and Woolworths Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Group and Loblaw Companies 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 Loblaw Companies Limited are associated (or correlated) with Woolworths Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Group has no effect on the direction of Loblaw Companies i.e., Loblaw Companies and Woolworths Group go up and down completely randomly.
Pair Corralation between Loblaw Companies and Woolworths Group
Assuming the 90 days horizon Loblaw Companies Limited is expected to generate 0.42 times more return on investment than Woolworths Group. However, Loblaw Companies Limited is 2.4 times less risky than Woolworths Group. It trades about 0.06 of its potential returns per unit of risk. Woolworths Group Limited is currently generating about -0.22 per unit of risk. If you would invest 12,605 in Loblaw Companies Limited on August 27, 2024 and sell it today you would earn a total of 184.00 from holding Loblaw Companies Limited or generate 1.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Loblaw Companies Limited vs. Woolworths Group Limited
Performance |
| Timeline |
| Loblaw Companies |
| Woolworths Group |
Loblaw Companies and Woolworths Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loblaw Companies and Woolworths Group
The main advantage of trading using opposite Loblaw Companies and Woolworths Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loblaw Companies position performs unexpectedly, Woolworths Group 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 Woolworths Group will offset losses from the drop in Woolworths Group's long position.| Loblaw Companies vs. Sprouts Farmers Market | Loblaw Companies vs. Kroger Company | Loblaw Companies vs. Village Super Market | Loblaw Companies vs. Weis Markets |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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