Correlation Between Sky Metals and Wesfarmers
Can any of the company-specific risk be diversified away by investing in both Sky Metals 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 Sky Metals and Wesfarmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sky Metals and Wesfarmers, you can compare the effects of market volatilities on Sky Metals 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 Sky Metals with a short position of Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sky Metals and Wesfarmers.
Diversification Opportunities for Sky Metals and Wesfarmers
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sky and Wesfarmers is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sky Metals and Wesfarmers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers and Sky Metals 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 Sky Metals 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 Sky Metals i.e., Sky Metals and Wesfarmers go up and down completely randomly.
Pair Corralation between Sky Metals and Wesfarmers
Assuming the 90 days trading horizon Sky Metals is expected to generate 5.48 times less return on investment than Wesfarmers. In addition to that, Sky Metals is 2.43 times more volatile than Wesfarmers. It trades about 0.0 of its total potential returns per unit of risk. Wesfarmers is currently generating about 0.07 per unit of volatility. If you would invest 6,909 in Wesfarmers on October 26, 2024 and sell it today you would earn a total of 323.00 from holding Wesfarmers or generate 4.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sky Metals vs. Wesfarmers
Performance |
| Timeline |
| Sky Metals |
| Wesfarmers |
Sky Metals and Wesfarmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sky Metals and Wesfarmers
The main advantage of trading using opposite Sky Metals and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sky Metals 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.| Sky Metals vs. Queste Communications | Sky Metals vs. IDP Education | Sky Metals vs. Carlton Investments | Sky Metals vs. Steamships Trading |
| Wesfarmers vs. Embark Education Group | Wesfarmers vs. Complii FinTech Solutions | Wesfarmers vs. Carawine Resources Limited | Wesfarmers vs. G8 Education |
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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