Correlation Between Afine Investments and Woolworths Holdings

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

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

Diversification Opportunities for Afine Investments and Woolworths Holdings

-0.24

Correlation Coefficient

Afine Investments  Woolworths Holdings

Very good diversification

The 3 months correlation between Afine and Woolworths is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Afine Investments and Woolworths Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Holdings and Afine Investments 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 Afine Investments are associated (or correlated) with Woolworths Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Holdings has no effect on the direction of Afine Investments i.e., Afine Investments and Woolworths Holdings go up and down completely randomly.

Pair Corralation between Afine Investments and Woolworths Holdings

Assuming the 90 days trading horizon Afine Investments is expected to generate 72.63 times more return on investment than Woolworths Holdings. However, Afine Investments is 72.63 times more volatile than Woolworths Holdings. It trades about 0.11 of its potential returns per unit of risk. Woolworths Holdings is currently generating about -0.01 per unit of risk. If you would invest  39,024  in Afine Investments on October 13, 2024 and sell it today you would earn a total of  1,176  from holding Afine Investments or generate 3.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Afine Investments  vs.  Woolworths Holdings

Afine Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Afine Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Afine Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Woolworths Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woolworths Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Afine Investments and Woolworths Holdings

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

The idea behind Afine Investments and Woolworths Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.