Correlation Between Woolworths and Australian Agricultural
Can any of the company-specific risk be diversified away by investing in both Woolworths and Australian Agricultural 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 and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woolworths and Australian Agricultural, you can compare the effects of market volatilities on Woolworths and Australian Agricultural 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 with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woolworths and Australian Agricultural.
Diversification Opportunities for Woolworths and Australian Agricultural
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Woolworths and Australian is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Woolworths 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 are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Woolworths i.e., Woolworths and Australian Agricultural go up and down completely randomly.
Pair Corralation between Woolworths and Australian Agricultural
Assuming the 90 days trading horizon Woolworths is expected to under-perform the Australian Agricultural. But the stock apears to be less risky and, when comparing its historical volatility, Woolworths is 1.61 times less risky than Australian Agricultural. The stock trades about -0.04 of its potential returns per unit of risk. The Australian Agricultural is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 128.00 in Australian Agricultural on September 1, 2024 and sell it today you would earn a total of 9.00 from holding Australian Agricultural or generate 7.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woolworths vs. Australian Agricultural
Performance |
| Timeline |
| Woolworths |
| Australian Agricultural |
Woolworths and Australian Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woolworths and Australian Agricultural
The main advantage of trading using opposite Woolworths and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woolworths position performs unexpectedly, Australian Agricultural 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 Australian Agricultural will offset losses from the drop in Australian Agricultural's long position.| Woolworths vs. Hutchison Telecommunications | Woolworths vs. Iron Road | Woolworths vs. Flagship Investments | Woolworths vs. A1 Investments Resources |
| Australian Agricultural vs. Retail Food Group | Australian Agricultural vs. Spirit Telecom | Australian Agricultural vs. Credit Clear | Australian Agricultural vs. Wt Financial Group |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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