Correlation Between Wesfarmers and Change Financial
Can any of the company-specific risk be diversified away by investing in both Wesfarmers and Change Financial 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 Change Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers and Change Financial Limited, you can compare the effects of market volatilities on Wesfarmers and Change Financial 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 Change Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and Change Financial.
Diversification Opportunities for Wesfarmers and Change Financial
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Wesfarmers and Change is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and Change Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Change Financial 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 Change Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Change Financial has no effect on the direction of Wesfarmers i.e., Wesfarmers and Change Financial go up and down completely randomly.
Pair Corralation between Wesfarmers and Change Financial
Assuming the 90 days trading horizon Wesfarmers is expected to under-perform the Change Financial. But the stock apears to be less risky and, when comparing its historical volatility, Wesfarmers is 3.06 times less risky than Change Financial. The stock trades about -0.08 of its potential returns per unit of risk. The Change Financial Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 5.70 in Change Financial Limited on October 13, 2024 and sell it today you would lose (0.10) from holding Change Financial Limited or give up 1.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wesfarmers vs. Change Financial Limited
Performance |
| Timeline |
| Wesfarmers |
| Change Financial |
Wesfarmers and Change Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesfarmers and Change Financial
The main advantage of trading using opposite Wesfarmers and Change Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers position performs unexpectedly, Change Financial 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 Change Financial will offset losses from the drop in Change Financial's long position.| Wesfarmers vs. TPG Telecom | Wesfarmers vs. Hutchison Telecommunications | Wesfarmers vs. Charter Hall Retail | Wesfarmers vs. Dug Technology |
| Change Financial vs. Technology One | Change Financial vs. Ainsworth Game Technology | Change Financial vs. MotorCycle Holdings | Change Financial vs. Dug Technology |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |