Correlation Between Fiskars Oyj and Wesfarmers

Can any of the company-specific risk be diversified away by investing in both Fiskars Oyj and Wesfarmers 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 Fiskars Oyj and Wesfarmers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fiskars Oyj Abp and Wesfarmers Limited, you can compare the effects of market volatilities on Fiskars Oyj and Wesfarmers 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 Fiskars Oyj with a short position of Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fiskars Oyj and Wesfarmers.

Diversification Opportunities for Fiskars Oyj and Wesfarmers

-0.55

Correlation Coefficient

Fiskars Oyj  Wesfarmers

Excellent diversification

The 3 months correlation between Fiskars and Wesfarmers is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Fiskars Oyj Abp and Wesfarmers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers Limited and Fiskars Oyj 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 Fiskars Oyj Abp are associated (or correlated) with Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers Limited has no effect on the direction of Fiskars Oyj i.e., Fiskars Oyj and Wesfarmers go up and down completely randomly.

Pair Corralation between Fiskars Oyj and Wesfarmers

Assuming the 90 days horizon Fiskars Oyj Abp is expected to under-perform the Wesfarmers. But the stock apears to be less risky and, when comparing its historical volatility, Fiskars Oyj Abp is 1.25 times less risky than Wesfarmers. The stock trades about -0.11 of its potential returns per unit of risk. The Wesfarmers Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,284  in Wesfarmers Limited on September 22, 2024 and sell it today you would lose (170.00) from holding Wesfarmers Limited or give up 3.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.78%
Values	Daily Returns

Fiskars Oyj Abp  vs.  Wesfarmers Limited

Fiskars Oyj Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fiskars Oyj Abp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fiskars Oyj is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Wesfarmers Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wesfarmers Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Wesfarmers is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fiskars Oyj and Wesfarmers

The main advantage of trading using opposite Fiskars Oyj and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fiskars Oyj position performs unexpectedly, Wesfarmers 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 Wesfarmers will offset losses from the drop in Wesfarmers' long position.

The idea behind Fiskars Oyj Abp and Wesfarmers Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..