Correlation Between Mirrabooka Investments and Wesfarmers

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

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

Diversification Opportunities for Mirrabooka Investments and Wesfarmers

0.03

Correlation Coefficient

Mirrabooka Investments  Wesfarmers

Significant diversification

The 3 months correlation between Mirrabooka and Wesfarmers is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Mirrabooka Investments and Wesfarmers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers and Mirrabooka Investments 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 Mirrabooka Investments 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 Mirrabooka Investments i.e., Mirrabooka Investments and Wesfarmers go up and down completely randomly.

Pair Corralation between Mirrabooka Investments and Wesfarmers

Assuming the 90 days trading horizon Mirrabooka Investments is expected to under-perform the Wesfarmers. But the stock apears to be less risky and, when comparing its historical volatility, Mirrabooka Investments is 1.66 times less risky than Wesfarmers. The stock trades about -0.04 of its potential returns per unit of risk. The Wesfarmers is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,869  in Wesfarmers on October 4, 2024 and sell it today you would earn a total of  273.00  from holding Wesfarmers or generate 3.97% return on investment over 90 days.

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

Mirrabooka Investments  vs.  Wesfarmers

Mirrabooka Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mirrabooka Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mirrabooka Investments 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 Mirrabooka Investments and Wesfarmers

The main advantage of trading using opposite Mirrabooka Investments and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mirrabooka Investments 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 Mirrabooka Investments 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.