Correlation Between Kerry and Great Western

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

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

Diversification Opportunities for Kerry and Great Western

-0.7

Correlation Coefficient

Kerry  Great Western

Excellent diversification

The 3 months correlation between Kerry and Great is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Kerry Group and Great Western Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Western Mining and Kerry 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 Kerry Group are associated (or correlated) with Great Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Western Mining has no effect on the direction of Kerry i.e., Kerry and Great Western go up and down completely randomly.

Pair Corralation between Kerry and Great Western

Assuming the 90 days trading horizon Kerry is expected to generate 74.27 times less return on investment than Great Western. But when comparing it to its historical volatility, Kerry Group is 9.86 times less risky than Great Western. It trades about 0.02 of its potential returns per unit of risk. Great Western Mining is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Great Western Mining on September 1, 2024 and sell it today you would earn a total of  0.05  from holding Great Western Mining or generate 100.0% return on investment over 90 days.

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

Kerry Group  vs.  Great Western Mining

Kerry Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kerry Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Kerry is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Great Western Mining

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Western Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Great Western reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kerry and Great Western

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

The idea behind Kerry Group and Great Western Mining 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.