Correlation Between Village Super and Coles

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

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

Diversification Opportunities for Village Super and Coles

0.03

Correlation Coefficient

Village Super  Coles

Significant diversification

The 3 months correlation between Village and Coles is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Village Super Market and Coles Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coles Group and Village Super 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 Village Super Market are associated (or correlated) with Coles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coles Group has no effect on the direction of Village Super i.e., Village Super and Coles go up and down completely randomly.

Pair Corralation between Village Super and Coles

Assuming the 90 days horizon Village Super is expected to generate 2.85 times less return on investment than Coles. But when comparing it to its historical volatility, Village Super Market is 4.23 times less risky than Coles. It trades about 0.06 of its potential returns per unit of risk. Coles Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  858.00  in Coles Group on September 30, 2024 and sell it today you would earn a total of  34.00  from holding Coles Group or generate 3.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	62.98%
Values	Daily Returns

Village Super Market  vs.  Coles Group

Village Super Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Village Super Market has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Village Super is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Coles Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coles Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Coles is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Village Super and Coles

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

The idea behind Village Super Market and Coles Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.