Correlation Between Hosken Consolidated and Woolworths Holdings

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

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

Diversification Opportunities for Hosken Consolidated and Woolworths Holdings

0.36

Correlation Coefficient

Hosken Consolidated  Woolworths Holdings

Weak diversification

The 3 months correlation between Hosken and Woolworths is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hosken Consolidated Investment and Woolworths Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Holdings and Hosken Consolidated 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 Hosken Consolidated Investments 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 Hosken Consolidated i.e., Hosken Consolidated and Woolworths Holdings go up and down completely randomly.

Pair Corralation between Hosken Consolidated and Woolworths Holdings

Assuming the 90 days trading horizon Hosken Consolidated Investments is expected to under-perform the Woolworths Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Hosken Consolidated Investments is 1.17 times less risky than Woolworths Holdings. The stock trades about -0.51 of its potential returns per unit of risk. The Woolworths Holdings is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  678,400  in Woolworths Holdings on September 19, 2024 and sell it today you would lose (52,100) from holding Woolworths Holdings or give up 7.68% of portfolio value over 90 days.

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

Hosken Consolidated Investment  vs.  Woolworths Holdings

Hosken Consolidated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hosken Consolidated Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Woolworths Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woolworths Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Woolworths Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hosken Consolidated and Woolworths Holdings

The main advantage of trading using opposite Hosken Consolidated and Woolworths Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hosken Consolidated 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 Hosken Consolidated Investments and Woolworths Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.