Correlation Between Wesfarmers and Premier Investments
Can any of the company-specific risk be diversified away by investing in both Wesfarmers and Premier 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 Premier Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers and Premier Investments, you can compare the effects of market volatilities on Wesfarmers and Premier 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 Premier Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and Premier Investments.
Diversification Opportunities for Wesfarmers and Premier Investments
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wesfarmers and Premier is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and Premier Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier 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 Premier Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Investments has no effect on the direction of Wesfarmers i.e., Wesfarmers and Premier Investments go up and down completely randomly.
Pair Corralation between Wesfarmers and Premier Investments
Assuming the 90 days trading horizon Wesfarmers is expected to generate 0.16 times more return on investment than Premier Investments. However, Wesfarmers is 6.42 times less risky than Premier Investments. It trades about 0.29 of its potential returns per unit of risk. Premier Investments is currently generating about -0.16 per unit of risk. If you would invest 7,142 in Wesfarmers on November 3, 2024 and sell it today you would earn a total of 518.00 from holding Wesfarmers or generate 7.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wesfarmers vs. Premier Investments
Performance |
| Timeline |
| Wesfarmers |
| Premier Investments |
Wesfarmers and Premier Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesfarmers and Premier Investments
The main advantage of trading using opposite Wesfarmers and Premier Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers position performs unexpectedly, Premier 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 Premier Investments will offset losses from the drop in Premier Investments' long position.| Wesfarmers vs. Infomedia | Wesfarmers vs. DY6 Metals | Wesfarmers vs. Perseus Mining | Wesfarmers vs. Norfolk Metals |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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