Correlation Between Group 6 and Wesfarmers

Can any of the company-specific risk be diversified away by investing in both Group 6 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 Group 6 and Wesfarmers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Group 6 Metals and Wesfarmers, you can compare the effects of market volatilities on Group 6 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 Group 6 with a short position of Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 6 and Wesfarmers.

Diversification Opportunities for Group 6 and Wesfarmers

0.0

Correlation Coefficient

Group 6  Wesfarmers

Pay attention - limited upside

The 3 months correlation between Group and Wesfarmers is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Group 6 Metals and Wesfarmers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers and Group 6 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 Group 6 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 Group 6 i.e., Group 6 and Wesfarmers go up and down completely randomly.

Pair Corralation between Group 6 and Wesfarmers

If you would invest  6,886  in Wesfarmers on October 7, 2024 and sell it today you would earn a total of  295.00  from holding Wesfarmers or generate 4.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Group 6 Metals  vs.  Wesfarmers

Group 6 Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Group 6 Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Group 6 is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Wesfarmers

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wesfarmers are ranked lower than 4 (%) 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 Group 6 and Wesfarmers

The main advantage of trading using opposite Group 6 and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 6 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 Group 6 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.