Correlation Between Woolworths Group and Seven I
Can any of the company-specific risk be diversified away by investing in both Woolworths Group and Seven I 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 Seven I 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 Seven i Holdings, you can compare the effects of market volatilities on Woolworths Group and Seven I 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 Seven I. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woolworths Group and Seven I.
Diversification Opportunities for Woolworths Group and Seven I
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Woolworths and Seven is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths Group Limited and Seven i Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven i Holdings 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 Seven I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven i Holdings has no effect on the direction of Woolworths Group i.e., Woolworths Group and Seven I go up and down completely randomly.
Pair Corralation between Woolworths Group and Seven I
Assuming the 90 days horizon Woolworths Group Limited is expected to under-perform the Seven I. But the pink sheet apears to be less risky and, when comparing its historical volatility, Woolworths Group Limited is 1.37 times less risky than Seven I. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Seven i Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,440 in Seven i Holdings on September 3, 2024 and sell it today you would earn a total of 168.00 from holding Seven i Holdings or generate 11.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woolworths Group Limited vs. Seven i Holdings
Performance |
| Timeline |
| Woolworths Group |
| Seven i Holdings |
Woolworths Group and Seven I Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woolworths Group and Seven I
The main advantage of trading using opposite Woolworths Group and Seven I positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woolworths Group position performs unexpectedly, Seven I 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 Seven I will offset losses from the drop in Seven I'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 |
| Seven I vs. Kesko Oyj ADR | Seven I vs. Om Holdings International | Seven I vs. Tesco PLC | Seven I vs. Carrefour SA |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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