Correlation Between Wesfarmers and PVW Resources
Can any of the company-specific risk be diversified away by investing in both Wesfarmers and PVW Resources 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 PVW Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers and PVW Resources, you can compare the effects of market volatilities on Wesfarmers and PVW Resources 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 PVW Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and PVW Resources.
Diversification Opportunities for Wesfarmers and PVW Resources
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Wesfarmers and PVW is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and PVW Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVW Resources 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 PVW Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVW Resources has no effect on the direction of Wesfarmers i.e., Wesfarmers and PVW Resources go up and down completely randomly.
Pair Corralation between Wesfarmers and PVW Resources
Assuming the 90 days trading horizon Wesfarmers is expected to generate 15.65 times less return on investment than PVW Resources. But when comparing it to its historical volatility, Wesfarmers is 7.95 times less risky than PVW Resources. It trades about 0.08 of its potential returns per unit of risk. PVW Resources is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1.20 in PVW Resources on November 27, 2024 and sell it today you would earn a total of 0.30 from holding PVW Resources or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wesfarmers vs. PVW Resources
Performance |
| Timeline |
| Wesfarmers |
| PVW Resources |
Wesfarmers and PVW Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesfarmers and PVW Resources
The main advantage of trading using opposite Wesfarmers and PVW Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers position performs unexpectedly, PVW Resources 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 PVW Resources will offset losses from the drop in PVW Resources' long position.| Wesfarmers vs. Diversified United Investment | Wesfarmers vs. Mayfield Childcare | Wesfarmers vs. Sports Entertainment Group | Wesfarmers vs. BKI Investment |
| PVW Resources vs. MFF Capital Investments | PVW Resources vs. Clime Investment Management | PVW Resources vs. Alternative Investment Trust | PVW Resources vs. Djerriwarrh Investments |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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