Correlation Between Woolworths Group and Kesko Oyj
Can any of the company-specific risk be diversified away by investing in both Woolworths Group and Kesko Oyj 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 Woolworths Group and Kesko Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woolworths Group Limited and Kesko Oyj ADR, you can compare the effects of market volatilities on Woolworths Group and Kesko Oyj 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 Woolworths Group with a short position of Kesko Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woolworths Group and Kesko Oyj.
Diversification Opportunities for Woolworths Group and Kesko Oyj
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Woolworths and Kesko is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths Group Limited and Kesko Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kesko Oyj ADR and Woolworths Group 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 Woolworths Group Limited are associated (or correlated) with Kesko Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kesko Oyj ADR has no effect on the direction of Woolworths Group i.e., Woolworths Group and Kesko Oyj go up and down completely randomly.
Pair Corralation between Woolworths Group and Kesko Oyj
Assuming the 90 days horizon Woolworths Group Limited is expected to generate 3.38 times more return on investment than Kesko Oyj. However, Woolworths Group is 3.38 times more volatile than Kesko Oyj ADR. It trades about 0.17 of its potential returns per unit of risk. Kesko Oyj ADR is currently generating about 0.04 per unit of risk. If you would invest 1,730 in Woolworths Group Limited on November 3, 2024 and sell it today you would earn a total of 291.00 from holding Woolworths Group Limited or generate 16.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woolworths Group Limited vs. Kesko Oyj ADR
Performance |
| Timeline |
| Woolworths Group |
| Kesko Oyj ADR |
Woolworths Group and Kesko Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woolworths Group and Kesko Oyj
The main advantage of trading using opposite Woolworths Group and Kesko Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woolworths Group position performs unexpectedly, Kesko Oyj 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 Kesko Oyj will offset losses from the drop in Kesko Oyj's long position.| Woolworths Group vs. Tesco PLC | Woolworths Group vs. Tesco PLC | Woolworths Group vs. Ocado Group PLC | Woolworths Group vs. Dairy Farm International |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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