Correlation Between Woolworths and Nsx
Can any of the company-specific risk be diversified away by investing in both Woolworths and Nsx 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 Nsx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Woolworths and Nsx, you can compare the effects of market volatilities on Woolworths and Nsx 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 Nsx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woolworths and Nsx.
Diversification Opportunities for Woolworths and Nsx
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Woolworths and Nsx is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths and Nsx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nsx 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 Nsx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nsx has no effect on the direction of Woolworths i.e., Woolworths and Nsx go up and down completely randomly.
Pair Corralation between Woolworths and Nsx
Assuming the 90 days trading horizon Woolworths is expected to generate 0.08 times more return on investment than Nsx. However, Woolworths is 12.09 times less risky than Nsx. It trades about 0.18 of its potential returns per unit of risk. Nsx is currently generating about -0.05 per unit of risk. If you would invest 2,951 in Woolworths on September 12, 2024 and sell it today you would earn a total of 83.00 from holding Woolworths or generate 2.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woolworths vs. Nsx
Performance |
| Timeline |
| Woolworths |
| Nsx |
Woolworths and Nsx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woolworths and Nsx
The main advantage of trading using opposite Woolworths and Nsx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woolworths position performs unexpectedly, Nsx 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 Nsx will offset losses from the drop in Nsx's long position.| Woolworths vs. Aussie Broadband | Woolworths vs. Autosports Group | Woolworths vs. Kneomedia | Woolworths vs. Embark Education Group |
| Nsx vs. Oneview Healthcare PLC | Nsx vs. Ramsay Health Care | Nsx vs. Truscott Mining Corp | Nsx vs. BTC Health Limited |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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