Correlation Between Stelar Metals and Wesfarmers
Can any of the company-specific risk be diversified away by investing in both Stelar 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 Stelar Metals and Wesfarmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stelar Metals and Wesfarmers, you can compare the effects of market volatilities on Stelar 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 Stelar Metals with a short position of Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stelar Metals and Wesfarmers.
Diversification Opportunities for Stelar Metals and Wesfarmers
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Stelar and Wesfarmers is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Stelar Metals and Wesfarmers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers and Stelar 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 Stelar 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 Stelar Metals i.e., Stelar Metals and Wesfarmers go up and down completely randomly.
Pair Corralation between Stelar Metals and Wesfarmers
Assuming the 90 days trading horizon Stelar Metals is expected to under-perform the Wesfarmers. In addition to that, Stelar Metals is 2.39 times more volatile than Wesfarmers. It trades about -0.11 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stelar Metals vs. Wesfarmers
Performance |
| Timeline |
| Stelar Metals |
| Wesfarmers |
Stelar Metals and Wesfarmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stelar Metals and Wesfarmers
The main advantage of trading using opposite Stelar Metals and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stelar 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.| Stelar Metals vs. Northern Star Resources | Stelar Metals vs. Evolution Mining | Stelar Metals vs. Bluescope Steel | Stelar Metals vs. De Grey Mining |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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