Correlation Between MultiChoice and Woolworths Holdings
Can any of the company-specific risk be diversified away by investing in both MultiChoice 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 MultiChoice and Woolworths Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MultiChoice Group and Woolworths Holdings, you can compare the effects of market volatilities on MultiChoice 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 MultiChoice with a short position of Woolworths Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of MultiChoice and Woolworths Holdings.
Diversification Opportunities for MultiChoice and Woolworths Holdings
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MultiChoice and Woolworths is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding MultiChoice Group and Woolworths Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Holdings and MultiChoice 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 MultiChoice Group 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 MultiChoice i.e., MultiChoice and Woolworths Holdings go up and down completely randomly.
Pair Corralation between MultiChoice and Woolworths Holdings
Assuming the 90 days trading horizon MultiChoice Group is expected to generate 0.18 times more return on investment than Woolworths Holdings. However, MultiChoice Group is 5.69 times less risky than Woolworths Holdings. It trades about 0.09 of its potential returns per unit of risk. Woolworths Holdings is currently generating about -0.22 per unit of risk. If you would invest 1,072,000 in MultiChoice Group on September 25, 2024 and sell it today you would earn a total of 5,600 from holding MultiChoice Group or generate 0.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
MultiChoice Group vs. Woolworths Holdings
Performance |
Timeline |
MultiChoice Group |
Woolworths Holdings |
MultiChoice and Woolworths Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MultiChoice and Woolworths Holdings
The main advantage of trading using opposite MultiChoice and Woolworths Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MultiChoice 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.MultiChoice vs. MC Mining | MultiChoice vs. Trematon Capital Investments | MultiChoice vs. Hosken Consolidated Investments | MultiChoice vs. Harmony Gold Mining |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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