Correlation Between Wesfarmers and Nsx
Can any of the company-specific risk be diversified away by investing in both Wesfarmers and Nsx 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 Nsx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers and Nsx, you can compare the effects of market volatilities on Wesfarmers and Nsx 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 Nsx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and Nsx.
Diversification Opportunities for Wesfarmers and Nsx
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Wesfarmers and Nsx is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and Nsx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nsx 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 Nsx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nsx has no effect on the direction of Wesfarmers i.e., Wesfarmers and Nsx go up and down completely randomly.
Pair Corralation between Wesfarmers and Nsx
Assuming the 90 days trading horizon Wesfarmers is expected to generate 0.12 times more return on investment than Nsx. However, Wesfarmers is 8.43 times less risky than Nsx. It trades about 0.36 of its potential returns per unit of risk. Nsx is currently generating about -0.05 per unit of risk. If you would invest 6,855 in Wesfarmers on September 12, 2024 and sell it today you would earn a total of 566.00 from holding Wesfarmers or generate 8.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wesfarmers vs. Nsx
Performance |
| Timeline |
| Wesfarmers |
| Nsx |
Wesfarmers and Nsx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesfarmers and Nsx
The main advantage of trading using opposite Wesfarmers and Nsx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers position performs unexpectedly, Nsx 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 Nsx will offset losses from the drop in Nsx's long position.| Wesfarmers vs. K2 Asset Management | Wesfarmers vs. Flagship Investments | Wesfarmers vs. Aristocrat Leisure | Wesfarmers vs. Microequities Asset Management |
| Nsx vs. Oneview Healthcare PLC | Nsx vs. Ramsay Health Care | Nsx vs. Truscott Mining Corp | Nsx vs. BTC Health Limited |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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