Correlation Between Wesfarmers and Platinum Asia
Can any of the company-specific risk be diversified away by investing in both Wesfarmers and Platinum Asia 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 Platinum Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers and Platinum Asia Investments, you can compare the effects of market volatilities on Wesfarmers and Platinum Asia 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 Platinum Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and Platinum Asia.
Diversification Opportunities for Wesfarmers and Platinum Asia
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wesfarmers and Platinum is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and Platinum Asia Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Asia 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 Platinum Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Asia Investments has no effect on the direction of Wesfarmers i.e., Wesfarmers and Platinum Asia go up and down completely randomly.
Pair Corralation between Wesfarmers and Platinum Asia
Assuming the 90 days trading horizon Wesfarmers is expected to generate 0.89 times more return on investment than Platinum Asia. However, Wesfarmers is 1.13 times less risky than Platinum Asia. It trades about 0.11 of its potential returns per unit of risk. Platinum Asia Investments is currently generating about 0.05 per unit of risk. If you would invest 4,573 in Wesfarmers on September 2, 2024 and sell it today you would earn a total of 2,610 from holding Wesfarmers or generate 57.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wesfarmers vs. Platinum Asia Investments
Performance |
| Timeline |
| Wesfarmers |
| Platinum Asia Investments |
Wesfarmers and Platinum Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesfarmers and Platinum Asia
The main advantage of trading using opposite Wesfarmers and Platinum Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers position performs unexpectedly, Platinum Asia 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 Platinum Asia will offset losses from the drop in Platinum Asia's long position.| Wesfarmers vs. Hansen Technologies | Wesfarmers vs. Richmond Vanadium Technology | Wesfarmers vs. Srj Technologies Group | Wesfarmers vs. RLF AgTech |
| Platinum Asia vs. WA1 Resources | Platinum Asia vs. Predictive Discovery | Platinum Asia vs. Cooper Metals | Platinum Asia vs. OD6 Metals |
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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