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
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lowes and Wesfarmers is 0.52. 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 under-perform the Wesfarmers. But the stock apears to be less risky and, when comparing its historical volatility, Lowes Companies is 1.32 times less risky than Wesfarmers. The stock trades about -0.02 of its potential returns per unit of risk. The Wesfarmers Ltd ADR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,275 in Wesfarmers Ltd ADR on October 26, 2024 and sell it today you would earn a total of 10.00 from holding Wesfarmers Ltd ADR or generate 0.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| 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. Floor Decor Holdings | Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies | Lowes Companies vs. Home Depot |
| 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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