Correlation Between Lowes Companies and Wesfarmers
Can any of the company-specific risk be diversified away by investing in both Lowes Companies and Wesfarmers 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 Lowes Companies and Wesfarmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and Wesfarmers Ltd ADR, you can compare the effects of market volatilities on Lowes Companies and Wesfarmers 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 Lowes Companies with a short position of Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and Wesfarmers.
Diversification Opportunities for Lowes Companies and Wesfarmers
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lowes and Wesfarmers is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and Wesfarmers Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers ADR and Lowes 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 Lowes Companies are associated (or correlated) with Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers ADR has no effect on the direction of Lowes Companies i.e., Lowes Companies and Wesfarmers go up and down completely randomly.
Pair Corralation between Lowes Companies and Wesfarmers
Considering the 90-day investment horizon Lowes Companies is expected to generate 0.96 times more return on investment than Wesfarmers. However, Lowes Companies is 1.04 times less risky than Wesfarmers. It trades about 0.09 of its potential returns per unit of risk. Wesfarmers Ltd ADR is currently generating about 0.03 per unit of risk. If you would invest 22,961 in Lowes Companies on September 3, 2024 and sell it today you would earn a total of 4,282 from holding Lowes Companies or generate 18.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowes Companies vs. Wesfarmers Ltd ADR
Performance |
| Timeline |
| Lowes Companies |
| Wesfarmers ADR |
Lowes Companies and Wesfarmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and Wesfarmers
The main advantage of trading using opposite Lowes Companies and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies position performs unexpectedly, Wesfarmers 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 Wesfarmers will offset losses from the drop in Wesfarmers' long position.| Lowes Companies vs. Partner Communications | Lowes Companies vs. Merck Company | Lowes Companies vs. Western Midstream Partners | Lowes Companies vs. Edgewise Therapeutics |
| Wesfarmers vs. Haverty Furniture Companies | Wesfarmers vs. Arhaus Inc | Wesfarmers vs. Home Depot | Wesfarmers vs. Lowes Companies |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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