Correlation Between Retail Food and Wesfarmers
Can any of the company-specific risk be diversified away by investing in both Retail Food 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 Retail Food and Wesfarmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Retail Food Group and Wesfarmers, you can compare the effects of market volatilities on Retail Food 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 Retail Food with a short position of Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Food and Wesfarmers.
Diversification Opportunities for Retail Food and Wesfarmers
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Retail and Wesfarmers is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Retail Food Group and Wesfarmers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers and Retail Food 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 Retail Food Group 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 has no effect on the direction of Retail Food i.e., Retail Food and Wesfarmers go up and down completely randomly.
Pair Corralation between Retail Food and Wesfarmers
Assuming the 90 days trading horizon Retail Food Group is expected to generate 2.07 times more return on investment than Wesfarmers. However, Retail Food is 2.07 times more volatile than Wesfarmers. It trades about 0.05 of its potential returns per unit of risk. Wesfarmers is currently generating about 0.08 per unit of risk. If you would invest 272.00 in Retail Food Group on September 12, 2024 and sell it today you would earn a total of 16.00 from holding Retail Food Group or generate 5.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Retail Food Group vs. Wesfarmers
Performance |
| Timeline |
| Retail Food Group |
| Wesfarmers |
Retail Food and Wesfarmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Retail Food and Wesfarmers
The main advantage of trading using opposite Retail Food and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Food 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.| Retail Food vs. Nine Entertainment Co | Retail Food vs. Aurelia Metals | Retail Food vs. ACDC Metals | Retail Food vs. Dexus Convenience Retail |
| Wesfarmers vs. K2 Asset Management | Wesfarmers vs. Flagship Investments | Wesfarmers vs. Aristocrat Leisure | Wesfarmers vs. Microequities Asset Management |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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