Correlation Between Wesfarmers and Duxton Broadacre
Can any of the company-specific risk be diversified away by investing in both Wesfarmers and Duxton Broadacre 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 Duxton Broadacre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers and Duxton Broadacre Farms, you can compare the effects of market volatilities on Wesfarmers and Duxton Broadacre 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 Duxton Broadacre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and Duxton Broadacre.
Diversification Opportunities for Wesfarmers and Duxton Broadacre
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Wesfarmers and Duxton is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and Duxton Broadacre Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duxton Broadacre Farms 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 Duxton Broadacre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duxton Broadacre Farms has no effect on the direction of Wesfarmers i.e., Wesfarmers and Duxton Broadacre go up and down completely randomly.
Pair Corralation between Wesfarmers and Duxton Broadacre
Assuming the 90 days trading horizon Wesfarmers is expected to generate 0.44 times more return on investment than Duxton Broadacre. However, Wesfarmers is 2.27 times less risky than Duxton Broadacre. It trades about 0.11 of its potential returns per unit of risk. Duxton Broadacre Farms is currently generating about 0.02 per unit of risk. If you would invest 5,106 in Wesfarmers on September 1, 2024 and sell it today you would earn a total of 2,077 from holding Wesfarmers or generate 40.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Wesfarmers vs. Duxton Broadacre Farms
Performance |
| Timeline |
| Wesfarmers |
| Duxton Broadacre Farms |
Wesfarmers and Duxton Broadacre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesfarmers and Duxton Broadacre
The main advantage of trading using opposite Wesfarmers and Duxton Broadacre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers position performs unexpectedly, Duxton Broadacre 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 Duxton Broadacre will offset losses from the drop in Duxton Broadacre's long position.| Wesfarmers vs. Epsilon Healthcare | Wesfarmers vs. Global Health | Wesfarmers vs. Neurotech International | Wesfarmers vs. Oceania Healthcare |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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