Correlation Between Empire Global and Woolworths Holdings

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

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

Diversification Opportunities for Empire Global and Woolworths Holdings

-0.11

Correlation Coefficient

Empire Global  Woolworths Holdings

Good diversification

The 3 months correlation between Empire and Woolworths is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Empire Global Gaming and Woolworths Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Holdings and Empire Global 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 Empire Global Gaming are associated (or correlated) with Woolworths Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Holdings has no effect on the direction of Empire Global i.e., Empire Global and Woolworths Holdings go up and down completely randomly.

Pair Corralation between Empire Global and Woolworths Holdings

Given the investment horizon of 90 days Empire Global Gaming is expected to generate 48.98 times more return on investment than Woolworths Holdings. However, Empire Global is 48.98 times more volatile than Woolworths Holdings Ltd. It trades about 0.28 of its potential returns per unit of risk. Woolworths Holdings Ltd is currently generating about -0.02 per unit of risk. If you would invest  0.00  in Empire Global Gaming on December 30, 2024 and sell it today you would earn a total of  0.01  from holding Empire Global Gaming or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	20.97%
Values	Daily Returns

Empire Global Gaming  vs.  Woolworths Holdings Ltd

Empire Global Gaming

Risk-Adjusted Performance

Solid

Over the last 90 days Empire Global Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unfluctuating technical and fundamental indicators, Empire Global reported solid returns over the last few months and may actually be approaching a breakup point.

Woolworths Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Woolworths Holdings Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Empire Global and Woolworths Holdings

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

The idea behind Empire Global Gaming and Woolworths Holdings Ltd 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.