Correlation Between Sears Canada and Woolworths Holdings

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

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

Diversification Opportunities for Sears Canada and Woolworths Holdings

0.0

Correlation Coefficient

Sears Canada  Woolworths Holdings

Pay attention - limited upside

The 3 months correlation between Sears and Woolworths is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sears Canada and Woolworths Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Holdings and Sears Canada 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 Sears Canada 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 Sears Canada i.e., Sears Canada and Woolworths Holdings go up and down completely randomly.

Pair Corralation between Sears Canada and Woolworths Holdings

If you would invest (100.00) in Sears Canada on November 29, 2024 and sell it today you would earn a total of  100.00  from holding Sears Canada or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Sears Canada  vs.  Woolworths Holdings Ltd

Sears Canada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sears Canada has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Sears Canada is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Woolworths Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Woolworths Holdings Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sears Canada and Woolworths Holdings

The main advantage of trading using opposite Sears Canada and Woolworths Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sears Canada 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.

The idea behind Sears Canada and Woolworths Holdings Ltd 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.