Correlation Between Seven West and ResMed

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

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

Diversification Opportunities for Seven West and ResMed

-0.6

Correlation Coefficient

Seven West  ResMed

Excellent diversification

The 3 months correlation between Seven and ResMed is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc and Seven West 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 Seven West Media are associated (or correlated) with ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of Seven West i.e., Seven West and ResMed go up and down completely randomly.

Pair Corralation between Seven West and ResMed

Assuming the 90 days horizon Seven West Media is expected to under-perform the ResMed. In addition to that, Seven West is 2.89 times more volatile than ResMed Inc. It trades about 0.0 of its total potential returns per unit of risk. ResMed Inc is currently generating about 0.1 per unit of volatility. If you would invest  18,010  in ResMed Inc on September 26, 2024 and sell it today you would earn a total of  4,600  from holding ResMed Inc or generate 25.54% return on investment over 90 days.

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

Seven West Media  vs.  ResMed Inc

Seven West Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seven West Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ResMed Inc

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ResMed is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Seven West and ResMed

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

The idea behind Seven West Media and ResMed Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.