Correlation Between Sky Metals and Woolworths
Can any of the company-specific risk be diversified away by investing in both Sky Metals and Woolworths 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 Woolworths into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sky Metals and Woolworths, you can compare the effects of market volatilities on Sky Metals and Woolworths 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 Woolworths. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sky Metals and Woolworths.
Diversification Opportunities for Sky Metals and Woolworths
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sky and Woolworths is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sky Metals and Woolworths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths 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 Woolworths. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths has no effect on the direction of Sky Metals i.e., Sky Metals and Woolworths go up and down completely randomly.
Pair Corralation between Sky Metals and Woolworths
Assuming the 90 days trading horizon Sky Metals is expected to generate 3.32 times more return on investment than Woolworths. However, Sky Metals is 3.32 times more volatile than Woolworths. It trades about 0.08 of its potential returns per unit of risk. Woolworths is currently generating about -0.03 per unit of risk. If you would invest 5.10 in Sky Metals on October 30, 2024 and sell it today you would earn a total of 0.30 from holding Sky Metals or generate 5.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sky Metals vs. Woolworths
Performance |
| Timeline |
| Sky Metals |
| Woolworths |
Sky Metals and Woolworths Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sky Metals and Woolworths
The main advantage of trading using opposite Sky Metals and Woolworths positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sky Metals position performs unexpectedly, Woolworths 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 will offset losses from the drop in Woolworths' long position.| Sky Metals vs. Dug Technology | Sky Metals vs. Aussie Broadband | Sky Metals vs. Argo Investments | Sky Metals vs. BKI Investment |
| Woolworths vs. TPG Telecom | Woolworths vs. Hotel Property Investments | Woolworths vs. Hutchison Telecommunications | Woolworths vs. Viva Leisure |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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