Correlation Between DY6 Metals and Wesfarmers

Can any of the company-specific risk be diversified away by investing in both DY6 Metals and Wesfarmers 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 DY6 Metals and Wesfarmers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DY6 Metals and Wesfarmers, you can compare the effects of market volatilities on DY6 Metals and Wesfarmers 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 DY6 Metals with a short position of Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of DY6 Metals and Wesfarmers.

Diversification Opportunities for DY6 Metals and Wesfarmers

-0.6

Correlation Coefficient

DY6 Metals  Wesfarmers

Excellent diversification

The 3 months correlation between DY6 and Wesfarmers is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding DY6 Metals and Wesfarmers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers and DY6 Metals 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 DY6 Metals are associated (or correlated) with Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers has no effect on the direction of DY6 Metals i.e., DY6 Metals and Wesfarmers go up and down completely randomly.

Pair Corralation between DY6 Metals and Wesfarmers

Assuming the 90 days trading horizon DY6 Metals is expected to generate 18.1 times more return on investment than Wesfarmers. However, DY6 Metals is 18.1 times more volatile than Wesfarmers. It trades about 0.03 of its potential returns per unit of risk. Wesfarmers is currently generating about 0.09 per unit of risk. If you would invest  10.00  in DY6 Metals on October 9, 2024 and sell it today you would lose (5.90) from holding DY6 Metals or give up 59.0% of portfolio value over 90 days.

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

DY6 Metals  vs.  Wesfarmers

DY6 Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DY6 Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Wesfarmers

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wesfarmers are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Wesfarmers 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 DY6 Metals and Wesfarmers

The main advantage of trading using opposite DY6 Metals and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DY6 Metals position performs unexpectedly, Wesfarmers 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 Wesfarmers will offset losses from the drop in Wesfarmers' long position.

The idea behind DY6 Metals and Wesfarmers 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.