Correlation Between Woolworths and Nova Eye
Can any of the company-specific risk be diversified away by investing in both Woolworths and Nova Eye 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 Nova Eye into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woolworths and Nova Eye Medical, you can compare the effects of market volatilities on Woolworths and Nova Eye 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 Nova Eye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woolworths and Nova Eye.
Diversification Opportunities for Woolworths and Nova Eye
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Woolworths and Nova is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths and Nova Eye Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Eye Medical 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 Nova Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Eye Medical has no effect on the direction of Woolworths i.e., Woolworths and Nova Eye go up and down completely randomly.
Pair Corralation between Woolworths and Nova Eye
Assuming the 90 days trading horizon Woolworths is expected to generate 0.23 times more return on investment than Nova Eye. However, Woolworths is 4.28 times less risky than Nova Eye. It trades about -0.02 of its potential returns per unit of risk. Nova Eye Medical is currently generating about -0.04 per unit of risk. If you would invest 3,114 in Woolworths on September 2, 2024 and sell it today you would lose (96.00) from holding Woolworths or give up 3.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woolworths vs. Nova Eye Medical
Performance |
| Timeline |
| Woolworths |
| Nova Eye Medical |
Woolworths and Nova Eye Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woolworths and Nova Eye
The main advantage of trading using opposite Woolworths and Nova Eye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woolworths position performs unexpectedly, Nova Eye 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 Nova Eye will offset losses from the drop in Nova Eye's long position.| Woolworths vs. Skycity Entertainment Group | Woolworths vs. Charter Hall Retail | Woolworths vs. oOhMedia | Woolworths vs. Phoslock Environmental Technologies |
| Nova Eye vs. Jupiter Energy | Nova Eye vs. WA1 Resources | Nova Eye vs. Cooper Metals | Nova Eye vs. OD6 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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