Correlation Between Ambertech and Wesfarmers

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

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

Diversification Opportunities for Ambertech and Wesfarmers

-0.58

Correlation Coefficient

Ambertech  Wesfarmers

Excellent diversification

The 3 months correlation between Ambertech and Wesfarmers is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ambertech and Wesfarmers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers and Ambertech 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 Ambertech 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 has no effect on the direction of Ambertech i.e., Ambertech and Wesfarmers go up and down completely randomly.

Pair Corralation between Ambertech and Wesfarmers

Assuming the 90 days trading horizon Ambertech is expected to under-perform the Wesfarmers. In addition to that, Ambertech is 3.47 times more volatile than Wesfarmers. It trades about -0.01 of its total potential returns per unit of risk. Wesfarmers is currently generating about 0.1 per unit of volatility. If you would invest  4,311  in Wesfarmers on October 9, 2024 and sell it today you would earn a total of  2,881  from holding Wesfarmers or generate 66.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ambertech  vs.  Wesfarmers

Ambertech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambertech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Wesfarmers

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wesfarmers are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Wesfarmers is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ambertech and Wesfarmers

The main advantage of trading using opposite Ambertech and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambertech 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 Ambertech and Wesfarmers 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..