Correlation Between Fox Wizel and Shufersal

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

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

Diversification Opportunities for Fox Wizel and Shufersal

0.94

Correlation Coefficient

Fox Wizel  Shufersal

Almost no diversification

The 3 months correlation between Fox and Shufersal is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fox Wizel and Shufersal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shufersal and Fox Wizel 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 Fox Wizel are associated (or correlated) with Shufersal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shufersal has no effect on the direction of Fox Wizel i.e., Fox Wizel and Shufersal go up and down completely randomly.

Pair Corralation between Fox Wizel and Shufersal

Assuming the 90 days trading horizon Fox Wizel is expected to generate 1.66 times less return on investment than Shufersal. In addition to that, Fox Wizel is 1.39 times more volatile than Shufersal. It trades about 0.14 of its total potential returns per unit of risk. Shufersal is currently generating about 0.32 per unit of volatility. If you would invest  316,300  in Shufersal on September 13, 2024 and sell it today you would earn a total of  70,400  from holding Shufersal or generate 22.26% return on investment over 90 days.

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

Fox Wizel  vs.  Shufersal

Fox Wizel

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fox Wizel are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fox Wizel sustained solid returns over the last few months and may actually be approaching a breakup point.

Shufersal

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shufersal are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Shufersal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fox Wizel and Shufersal

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

The idea behind Fox Wizel and Shufersal 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.