Correlation Between Wesfarmers and AiMedia Technologies
Can any of the company-specific risk be diversified away by investing in both Wesfarmers and AiMedia Technologies 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 AiMedia Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers and AiMedia Technologies, you can compare the effects of market volatilities on Wesfarmers and AiMedia Technologies 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 AiMedia Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and AiMedia Technologies.
Diversification Opportunities for Wesfarmers and AiMedia Technologies
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Wesfarmers and AiMedia is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and AiMedia Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AiMedia Technologies 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 AiMedia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AiMedia Technologies has no effect on the direction of Wesfarmers i.e., Wesfarmers and AiMedia Technologies go up and down completely randomly.
Pair Corralation between Wesfarmers and AiMedia Technologies
Assuming the 90 days trading horizon Wesfarmers is expected to generate 3.05 times less return on investment than AiMedia Technologies. But when comparing it to its historical volatility, Wesfarmers is 3.49 times less risky than AiMedia Technologies. It trades about 0.08 of its potential returns per unit of risk. AiMedia Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 27.00 in AiMedia Technologies on January 21, 2025 and sell it today you would earn a total of 47.00 from holding AiMedia Technologies or generate 174.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wesfarmers vs. AiMedia Technologies
Performance |
| Timeline |
| Wesfarmers |
| AiMedia Technologies |
Wesfarmers and AiMedia Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesfarmers and AiMedia Technologies
The main advantage of trading using opposite Wesfarmers and AiMedia Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers position performs unexpectedly, AiMedia Technologies 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 AiMedia Technologies will offset losses from the drop in AiMedia Technologies' long position.| Wesfarmers vs. Rand Mining | Wesfarmers vs. Aeris Environmental | Wesfarmers vs. Mount Gibson Iron | Wesfarmers vs. Peel Mining |
| AiMedia Technologies vs. Dug Technology | AiMedia Technologies vs. Arc Funds | AiMedia Technologies vs. ARN Media Limited | AiMedia Technologies vs. Nine Entertainment Co |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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