Correlation Between Talisman Mining and Woolworths

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

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

Diversification Opportunities for Talisman Mining and Woolworths

0.01

Correlation Coefficient

Talisman Mining  Woolworths

Significant diversification

The 3 months correlation between Talisman and Woolworths is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Talisman Mining and Woolworths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths and Talisman Mining 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 Talisman Mining 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 Talisman Mining i.e., Talisman Mining and Woolworths go up and down completely randomly.

Pair Corralation between Talisman Mining and Woolworths

Assuming the 90 days trading horizon Talisman Mining is expected to generate 3.32 times more return on investment than Woolworths. However, Talisman Mining is 3.32 times more volatile than Woolworths. It trades about 0.07 of its potential returns per unit of risk. Woolworths is currently generating about -0.18 per unit of risk. If you would invest  21.00  in Talisman Mining on September 14, 2024 and sell it today you would earn a total of  3.00  from holding Talisman Mining or generate 14.29% return on investment over 90 days.

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

Talisman Mining  vs.  Woolworths

Talisman Mining

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Talisman Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Talisman Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Talisman Mining and Woolworths

The main advantage of trading using opposite Talisman Mining and Woolworths positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talisman Mining 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 Talisman Mining 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.