Correlation Between Coles and Nsx

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

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

Diversification Opportunities for Coles and Nsx

-0.59

Correlation Coefficient

Coles  Nsx

Excellent diversification

The 3 months correlation between Coles and Nsx is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Coles Group and Nsx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nsx 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 Nsx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nsx has no effect on the direction of Coles i.e., Coles and Nsx go up and down completely randomly.

Pair Corralation between Coles and Nsx

Assuming the 90 days trading horizon Coles is expected to generate 17.35 times less return on investment than Nsx. But when comparing it to its historical volatility, Coles Group is 8.12 times less risky than Nsx. It trades about 0.07 of its potential returns per unit of risk. Nsx is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Nsx on September 4, 2024 and sell it today you would earn a total of  1.10  from holding Nsx or generate 73.33% return on investment over 90 days.

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

Coles Group  vs.  Nsx

Coles Group

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coles Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Coles is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Nsx

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nsx are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nsx unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coles and Nsx

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

The idea behind Coles Group and Nsx 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.