Correlation Between Wesfarmers and ACDC Metals
Can any of the company-specific risk be diversified away by investing in both Wesfarmers and ACDC Metals 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 Wesfarmers and ACDC Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers and ACDC Metals, you can compare the effects of market volatilities on Wesfarmers and ACDC Metals 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 Wesfarmers with a short position of ACDC Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and ACDC Metals.
Diversification Opportunities for Wesfarmers and ACDC Metals
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Wesfarmers and ACDC is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and ACDC Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACDC Metals and Wesfarmers 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 Wesfarmers are associated (or correlated) with ACDC Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACDC Metals has no effect on the direction of Wesfarmers i.e., Wesfarmers and ACDC Metals go up and down completely randomly.
Pair Corralation between Wesfarmers and ACDC Metals
Assuming the 90 days trading horizon Wesfarmers is expected to generate 0.26 times more return on investment than ACDC Metals. However, Wesfarmers is 3.8 times less risky than ACDC Metals. It trades about 0.1 of its potential returns per unit of risk. ACDC Metals is currently generating about -0.01 per unit of risk. If you would invest 4,763 in Wesfarmers on October 24, 2024 and sell it today you would earn a total of 2,525 from holding Wesfarmers or generate 53.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wesfarmers vs. ACDC Metals
Performance |
| Timeline |
| Wesfarmers |
| ACDC Metals |
Wesfarmers and ACDC Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesfarmers and ACDC Metals
The main advantage of trading using opposite Wesfarmers and ACDC Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers position performs unexpectedly, ACDC Metals 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 ACDC Metals will offset losses from the drop in ACDC Metals' long position.| Wesfarmers vs. ACDC Metals | Wesfarmers vs. Balkan Mining and | Wesfarmers vs. Sayona Mining | Wesfarmers vs. Peel Mining |
| ACDC Metals vs. Clime Investment Management | ACDC Metals vs. Sky Metals | ACDC Metals vs. Hutchison Telecommunications | ACDC Metals vs. Maggie Beer Holdings |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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