Correlation Between Carnegie Clean and Woolworths

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

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

Diversification Opportunities for Carnegie Clean and Woolworths

-0.05

Correlation Coefficient

Carnegie Clean  Woolworths

Good diversification

The 3 months correlation between Carnegie and Woolworths is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Carnegie Clean Energy and Woolworths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths and Carnegie Clean 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 Carnegie Clean Energy 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 Carnegie Clean i.e., Carnegie Clean and Woolworths go up and down completely randomly.

Pair Corralation between Carnegie Clean and Woolworths

Assuming the 90 days trading horizon Carnegie Clean Energy is expected to generate 2.97 times more return on investment than Woolworths. However, Carnegie Clean is 2.97 times more volatile than Woolworths. It trades about -0.02 of its potential returns per unit of risk. Woolworths is currently generating about -0.1 per unit of risk. If you would invest  4.00  in Carnegie Clean Energy on October 10, 2024 and sell it today you would lose (0.30) from holding Carnegie Clean Energy or give up 7.5% of portfolio value over 90 days.

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

Carnegie Clean Energy  vs.  Woolworths

Carnegie Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carnegie Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Carnegie Clean 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

0 of 100

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 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.

Pair Trading with Carnegie Clean and Woolworths

The main advantage of trading using opposite Carnegie Clean and Woolworths positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnegie Clean 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 Carnegie Clean Energy 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.