Correlation Between Ocado Group and Woolworths Group

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

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

Diversification Opportunities for Ocado Group and Woolworths Group

0.36

Correlation Coefficient

Ocado Group  Woolworths Group

Weak diversification

The 3 months correlation between Ocado and Woolworths is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ocado Group PLC and Woolworths Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Group and Ocado Group 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 Ocado Group PLC are associated (or correlated) with Woolworths Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Group has no effect on the direction of Ocado Group i.e., Ocado Group and Woolworths Group go up and down completely randomly.

Pair Corralation between Ocado Group and Woolworths Group

Assuming the 90 days horizon Ocado Group PLC is expected to generate 0.94 times more return on investment than Woolworths Group. However, Ocado Group PLC is 1.07 times less risky than Woolworths Group. It trades about 0.04 of its potential returns per unit of risk. Woolworths Group Limited is currently generating about 0.03 per unit of risk. If you would invest  361.00  in Ocado Group PLC on December 30, 2024 and sell it today you would earn a total of  22.00  from holding Ocado Group PLC or generate 6.09% return on investment over 90 days.

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

Ocado Group PLC  vs.  Woolworths Group Limited

Ocado Group PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ocado Group PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Ocado Group reported solid returns over the last few months and may actually be approaching a breakup point.

Woolworths Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Woolworths Group Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Woolworths Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ocado Group and Woolworths Group

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

The idea behind Ocado Group PLC and Woolworths Group 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.