Correlation Between Wesfarmers and Global Health
Can any of the company-specific risk be diversified away by investing in both Wesfarmers and Global Health 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 Global Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers and Global Health, you can compare the effects of market volatilities on Wesfarmers and Global Health 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 Global Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and Global Health.
Diversification Opportunities for Wesfarmers and Global Health
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Wesfarmers and Global is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health 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 Global Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Health has no effect on the direction of Wesfarmers i.e., Wesfarmers and Global Health go up and down completely randomly.
Pair Corralation between Wesfarmers and Global Health
Assuming the 90 days trading horizon Wesfarmers is expected to generate 0.21 times more return on investment than Global Health. However, Wesfarmers is 4.74 times less risky than Global Health. It trades about 0.11 of its potential returns per unit of risk. Global Health is currently generating about 0.01 per unit of risk. If you would invest 4,311 in Wesfarmers on September 13, 2024 and sell it today you would earn a total of 3,187 from holding Wesfarmers or generate 73.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wesfarmers vs. Global Health
Performance |
| Timeline |
| Wesfarmers |
| Global Health |
Wesfarmers and Global Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesfarmers and Global Health
The main advantage of trading using opposite Wesfarmers and Global Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers position performs unexpectedly, Global Health 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 Global Health will offset losses from the drop in Global Health's long position.| Wesfarmers vs. Farm Pride Foods | Wesfarmers vs. Premier Investments | Wesfarmers vs. Hotel Property Investments | Wesfarmers vs. Dicker Data |
| Global Health vs. PVW Resources | Global Health vs. Woolworths | Global Health vs. Wesfarmers | Global Health vs. Ramsay Health Care |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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