Correlation Between Coles and Skycity Entertainment

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

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

Diversification Opportunities for Coles and Skycity Entertainment

0.27

Correlation Coefficient

Coles  Skycity Entertainment

Modest diversification

The 3 months correlation between Coles and Skycity is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Coles Group and Skycity Entertainment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skycity Entertainment 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 Skycity Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skycity Entertainment has no effect on the direction of Coles i.e., Coles and Skycity Entertainment go up and down completely randomly.

Pair Corralation between Coles and Skycity Entertainment

Assuming the 90 days trading horizon Coles Group is expected to generate 0.24 times more return on investment than Skycity Entertainment. However, Coles Group is 4.09 times less risky than Skycity Entertainment. It trades about -0.05 of its potential returns per unit of risk. Skycity Entertainment Group is currently generating about -0.05 per unit of risk. If you would invest  1,900  in Coles Group on October 4, 2024 and sell it today you would lose (11.00) from holding Coles Group or give up 0.58% of portfolio value over 90 days.

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

Coles Group  vs.  Skycity Entertainment Group

Coles Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coles Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Coles may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Skycity Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skycity Entertainment Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Skycity Entertainment 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 Coles and Skycity Entertainment

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

The idea behind Coles Group and Skycity Entertainment Group 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.