Correlation Between Autosports and Woolworths

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

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

Diversification Opportunities for Autosports and Woolworths

-0.04

Correlation Coefficient

Autosports  Woolworths

Good diversification

The 3 months correlation between Autosports and Woolworths is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Autosports Group and Woolworths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths and Autosports 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 Autosports Group are associated (or correlated) with Woolworths. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths has no effect on the direction of Autosports i.e., Autosports and Woolworths go up and down completely randomly.

Pair Corralation between Autosports and Woolworths

Assuming the 90 days trading horizon Autosports Group is expected to generate 2.2 times more return on investment than Woolworths. However, Autosports is 2.2 times more volatile than Woolworths. It trades about 0.0 of its potential returns per unit of risk. Woolworths is currently generating about -0.01 per unit of risk. If you would invest  187.00  in Autosports Group on December 2, 2024 and sell it today you would lose (3.00) from holding Autosports Group or give up 1.6% of portfolio value over 90 days.

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

Autosports Group  vs.  Woolworths

Autosports Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Autosports Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Autosports is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Woolworths

Risk-Adjusted Performance

Very Weak

Over the last 90 days Woolworths has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Woolworths 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 Autosports and Woolworths

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

The idea behind Autosports Group and Woolworths 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.