Correlation Between Woolworths Group and Loblaw Companies
Can any of the company-specific risk be diversified away by investing in both Woolworths Group and Loblaw Companies 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 Loblaw Companies 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 Loblaw Companies Limited, you can compare the effects of market volatilities on Woolworths Group and Loblaw Companies 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 Loblaw Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woolworths Group and Loblaw Companies.
Diversification Opportunities for Woolworths Group and Loblaw Companies
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Woolworths and Loblaw is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths Group Limited and Loblaw Companies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loblaw Companies 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 Loblaw Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loblaw Companies has no effect on the direction of Woolworths Group i.e., Woolworths Group and Loblaw Companies go up and down completely randomly.
Pair Corralation between Woolworths Group and Loblaw Companies
Assuming the 90 days horizon Woolworths Group is expected to generate 2.0 times less return on investment than Loblaw Companies. But when comparing it to its historical volatility, Woolworths Group Limited is 1.85 times less risky than Loblaw Companies. It trades about 0.09 of its potential returns per unit of risk. Loblaw Companies Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 12,400 in Loblaw Companies Limited on September 12, 2024 and sell it today you would earn a total of 400.00 from holding Loblaw Companies Limited or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woolworths Group Limited vs. Loblaw Companies Limited
Performance |
| Timeline |
| Woolworths Group |
| Loblaw Companies |
Woolworths Group and Loblaw Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woolworths Group and Loblaw Companies
The main advantage of trading using opposite Woolworths Group and Loblaw Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woolworths Group position performs unexpectedly, Loblaw Companies 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 Loblaw Companies will offset losses from the drop in Loblaw Companies' long position.| Woolworths Group vs. Perseus Mining Limited | Woolworths Group vs. SWISS WATER DECAFFCOFFEE | Woolworths Group vs. Check Point Software | Woolworths Group vs. AXWAY SOFTWARE EO |
| Loblaw Companies vs. Woolworths Group Limited | Loblaw Companies vs. Superior Plus Corp | Loblaw Companies vs. SIVERS SEMICONDUCTORS AB | Loblaw Companies vs. Norsk Hydro ASA |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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