Correlation Between Wesfarmers and Mirrabooka Investments
Can any of the company-specific risk be diversified away by investing in both Wesfarmers and Mirrabooka Investments 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 Mirrabooka Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers and Mirrabooka Investments, you can compare the effects of market volatilities on Wesfarmers and Mirrabooka Investments 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 Mirrabooka Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and Mirrabooka Investments.
Diversification Opportunities for Wesfarmers and Mirrabooka Investments
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Wesfarmers and Mirrabooka is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and Mirrabooka Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mirrabooka Investments 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 Mirrabooka Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mirrabooka Investments has no effect on the direction of Wesfarmers i.e., Wesfarmers and Mirrabooka Investments go up and down completely randomly.
Pair Corralation between Wesfarmers and Mirrabooka Investments
Assuming the 90 days trading horizon Wesfarmers is expected to generate 1.05 times more return on investment than Mirrabooka Investments. However, Wesfarmers is 1.05 times more volatile than Mirrabooka Investments. It trades about 0.1 of its potential returns per unit of risk. Mirrabooka Investments is currently generating about 0.06 per unit of risk. If you would invest 5,230 in Wesfarmers on August 30, 2024 and sell it today you would earn a total of 1,976 from holding Wesfarmers or generate 37.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wesfarmers vs. Mirrabooka Investments
Performance |
| Timeline |
| Wesfarmers |
| Mirrabooka Investments |
Wesfarmers and Mirrabooka Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesfarmers and Mirrabooka Investments
The main advantage of trading using opposite Wesfarmers and Mirrabooka Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers position performs unexpectedly, Mirrabooka Investments 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 Mirrabooka Investments will offset losses from the drop in Mirrabooka Investments' long position.| Wesfarmers vs. Mirrabooka Investments | Wesfarmers vs. Garda Diversified Ppty | Wesfarmers vs. Regal Investment | Wesfarmers vs. Diversified United Investment |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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