Correlation Between GALENA MINING and Wesfarmers

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

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

Diversification Opportunities for GALENA MINING and Wesfarmers

0.0

Correlation Coefficient

GALENA MINING  Wesfarmers

Pay attention - limited upside

The 3 months correlation between GALENA and Wesfarmers is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GALENA MINING LTD and Wesfarmers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers Limited and GALENA MINING 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 GALENA MINING LTD 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 Limited has no effect on the direction of GALENA MINING i.e., GALENA MINING and Wesfarmers go up and down completely randomly.

Pair Corralation between GALENA MINING and Wesfarmers

Assuming the 90 days horizon GALENA MINING LTD is expected to under-perform the Wesfarmers. In addition to that, GALENA MINING is 5.09 times more volatile than Wesfarmers Limited. It trades about -0.02 of its total potential returns per unit of risk. Wesfarmers Limited is currently generating about 0.07 per unit of volatility. If you would invest  2,775  in Wesfarmers Limited on October 4, 2024 and sell it today you would earn a total of  1,547  from holding Wesfarmers Limited or generate 55.75% return on investment over 90 days.

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

GALENA MINING LTD  vs.  Wesfarmers Limited

GALENA MINING LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GALENA MINING LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GALENA MINING is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Wesfarmers Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wesfarmers Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Wesfarmers is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GALENA MINING and Wesfarmers

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

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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.