Correlation Between Wesfarmers and WiseTech Global
Can any of the company-specific risk be diversified away by investing in both Wesfarmers and WiseTech Global 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 WiseTech Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesfarmers and WiseTech Global Limited, you can compare the effects of market volatilities on Wesfarmers and WiseTech Global 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 WiseTech Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and WiseTech Global.
Diversification Opportunities for Wesfarmers and WiseTech Global
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Wesfarmers and WiseTech is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and WiseTech Global Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WiseTech Global 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 WiseTech Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WiseTech Global has no effect on the direction of Wesfarmers i.e., Wesfarmers and WiseTech Global go up and down completely randomly.
Pair Corralation between Wesfarmers and WiseTech Global
Assuming the 90 days trading horizon Wesfarmers is expected to generate 0.28 times more return on investment than WiseTech Global. However, Wesfarmers is 3.56 times less risky than WiseTech Global. It trades about 0.08 of its potential returns per unit of risk. WiseTech Global Limited is currently generating about -0.19 per unit of risk. If you would invest 7,546 in Wesfarmers on November 27, 2024 and sell it today you would earn a total of 142.00 from holding Wesfarmers or generate 1.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wesfarmers vs. WiseTech Global Limited
Performance |
| Timeline |
| Wesfarmers |
| WiseTech Global |
Wesfarmers and WiseTech Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wesfarmers and WiseTech Global
The main advantage of trading using opposite Wesfarmers and WiseTech Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesfarmers position performs unexpectedly, WiseTech Global 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 WiseTech Global will offset losses from the drop in WiseTech Global's long position.| Wesfarmers vs. Diversified United Investment | Wesfarmers vs. Mayfield Childcare | Wesfarmers vs. Sports Entertainment Group | Wesfarmers vs. BKI Investment |
| WiseTech Global vs. Aussie Broadband | WiseTech Global vs. Catalyst Metals | WiseTech Global vs. Mayfield Childcare | WiseTech Global vs. 29Metals |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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