Correlation Between Fernhill Corp and WiseTech Global

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

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

Diversification Opportunities for Fernhill Corp and WiseTech Global

-0.5

Correlation Coefficient

Fernhill Corp  WiseTech Global

Very good diversification

The 3 months correlation between Fernhill and WiseTech is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Fernhill Corp and WiseTech Global Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WiseTech Global and Fernhill Corp 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 Fernhill Corp are associated (or correlated) with WiseTech Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WiseTech Global has no effect on the direction of Fernhill Corp i.e., Fernhill Corp and WiseTech Global go up and down completely randomly.

Pair Corralation between Fernhill Corp and WiseTech Global

Given the investment horizon of 90 days Fernhill Corp is expected to generate 2.86 times more return on investment than WiseTech Global. However, Fernhill Corp is 2.86 times more volatile than WiseTech Global Limited. It trades about 0.02 of its potential returns per unit of risk. WiseTech Global Limited is currently generating about 0.06 per unit of risk. If you would invest  0.27  in Fernhill Corp on October 24, 2024 and sell it today you would lose (0.16) from holding Fernhill Corp or give up 59.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	82.59%
Values	Daily Returns

Fernhill Corp  vs.  WiseTech Global Limited

Fernhill Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fernhill Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Fernhill Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

WiseTech Global

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WiseTech Global Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, WiseTech Global may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fernhill Corp and WiseTech Global

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

The idea behind Fernhill Corp and WiseTech Global Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.