Correlation Between Coles and Village Super

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

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

Diversification Opportunities for Coles and Village Super

0.03

Correlation Coefficient

Coles  Village Super

Significant diversification

The 3 months correlation between Coles and Village is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Coles Group and Village Super Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Super Market and Coles 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 Coles Group are associated (or correlated) with Village Super. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Super Market has no effect on the direction of Coles i.e., Coles and Village Super go up and down completely randomly.

Pair Corralation between Coles and Village Super

Assuming the 90 days horizon Coles Group is expected to generate 4.23 times more return on investment than Village Super. However, Coles is 4.23 times more volatile than Village Super Market. It trades about 0.04 of its potential returns per unit of risk. Village Super Market is currently generating about 0.06 per unit of risk. If you would invest  858.00  in Coles Group on September 30, 2024 and sell it today you would earn a total of  34.00  from holding Coles Group or generate 3.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	62.98%
Values	Daily Returns

Coles Group  vs.  Village Super Market

Coles Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Village Super Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Village Super Market has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Village Super is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coles and Village Super

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

The idea behind Coles Group and Village Super Market 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .