Correlation Between Wesfarmers and EMvision Medical

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

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

Diversification Opportunities for Wesfarmers and EMvision Medical

0.27

Correlation Coefficient

Wesfarmers  EMvision Medical

Modest diversification

The 3 months correlation between Wesfarmers and EMvision is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and EMvision Medical Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMvision Medical Devices and Wesfarmers 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 Wesfarmers are associated (or correlated) with EMvision Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMvision Medical Devices has no effect on the direction of Wesfarmers i.e., Wesfarmers and EMvision Medical go up and down completely randomly.

Pair Corralation between Wesfarmers and EMvision Medical

Assuming the 90 days trading horizon Wesfarmers is expected to generate 5.69 times less return on investment than EMvision Medical. But when comparing it to its historical volatility, Wesfarmers is 2.26 times less risky than EMvision Medical. It trades about 0.01 of its potential returns per unit of risk. EMvision Medical Devices is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  186.00  in EMvision Medical Devices on December 25, 2024 and sell it today you would earn a total of  6.00  from holding EMvision Medical Devices or generate 3.23% return on investment over 90 days.

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

Wesfarmers  vs.  EMvision Medical Devices

Wesfarmers

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wesfarmers are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Wesfarmers is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

EMvision Medical Devices

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EMvision Medical Devices are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, EMvision Medical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Wesfarmers and EMvision Medical

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

The idea behind Wesfarmers and EMvision Medical Devices 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.