Correlation Between Woolworths and Arc Funds
Can any of the company-specific risk be diversified away by investing in both Woolworths and Arc Funds 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 Arc Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woolworths and Arc Funds, you can compare the effects of market volatilities on Woolworths and Arc Funds 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 Arc Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woolworths and Arc Funds.
Diversification Opportunities for Woolworths and Arc Funds
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Woolworths and Arc is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths and Arc Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arc Funds 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 Arc Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arc Funds has no effect on the direction of Woolworths i.e., Woolworths and Arc Funds go up and down completely randomly.
Pair Corralation between Woolworths and Arc Funds
Assuming the 90 days trading horizon Woolworths is expected to under-perform the Arc Funds. But the stock apears to be less risky and, when comparing its historical volatility, Woolworths is 4.95 times less risky than Arc Funds. The stock trades about -0.05 of its potential returns per unit of risk. The Arc Funds is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 9.40 in Arc Funds on November 5, 2024 and sell it today you would earn a total of 3.60 from holding Arc Funds or generate 38.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woolworths vs. Arc Funds
Performance |
| Timeline |
| Woolworths |
| Arc Funds |
Woolworths and Arc Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woolworths and Arc Funds
The main advantage of trading using opposite Woolworths and Arc Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woolworths position performs unexpectedly, Arc Funds 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 Arc Funds will offset losses from the drop in Arc Funds' long position.| Woolworths vs. Insignia Financial | Woolworths vs. Macquarie Bank Limited | Woolworths vs. COG Financial Services | Woolworths vs. Qbe Insurance Group |
| Arc Funds vs. Black Rock Mining | Arc Funds vs. 4Dmedical | Arc Funds vs. 29Metals | Arc Funds vs. Aurelia Metals |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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