Correlation Between Pact Group and Woolworths

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

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

Diversification Opportunities for Pact Group and Woolworths

0.57

Correlation Coefficient

Pact Group  Woolworths

Very weak diversification

The 3 months correlation between Pact and Woolworths is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pact Group Holdings and Woolworths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths and Pact 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 Pact Group Holdings are associated (or correlated) with Woolworths. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths has no effect on the direction of Pact Group i.e., Pact Group and Woolworths go up and down completely randomly.

Pair Corralation between Pact Group and Woolworths

Assuming the 90 days trading horizon Pact Group Holdings is expected to under-perform the Woolworths. In addition to that, Pact Group is 2.57 times more volatile than Woolworths. It trades about -0.01 of its total potential returns per unit of risk. Woolworths is currently generating about 0.0 per unit of volatility. If you would invest  3,152  in Woolworths on September 26, 2024 and sell it today you would lose (113.00) from holding Woolworths or give up 3.59% of portfolio value over 90 days.

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

Pact Group Holdings  vs.  Woolworths

Pact Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pact Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Pact Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Woolworths

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woolworths has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Pact Group and Woolworths

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

The idea behind Pact Group Holdings and Woolworths 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.