Correlation Between Wesfarmers and Ragnar Metals

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

By analyzing existing cross correlation between Wesfarmers and Ragnar Metals, you can compare the effects of market volatilities on Wesfarmers and Ragnar Metals 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 Ragnar Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesfarmers and Ragnar Metals.

Diversification Opportunities for Wesfarmers and Ragnar Metals

-0.48

Correlation Coefficient

Wesfarmers  Ragnar Metals

Very good diversification

The 3 months correlation between Wesfarmers and Ragnar is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Wesfarmers and Ragnar Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ragnar Metals 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 Ragnar Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ragnar Metals has no effect on the direction of Wesfarmers i.e., Wesfarmers and Ragnar Metals go up and down completely randomly.

Pair Corralation between Wesfarmers and Ragnar Metals

Assuming the 90 days trading horizon Wesfarmers is expected to generate 0.42 times more return on investment than Ragnar Metals. However, Wesfarmers is 2.36 times less risky than Ragnar Metals. It trades about 0.04 of its potential returns per unit of risk. Ragnar Metals is currently generating about -0.11 per unit of risk. If you would invest  6,977  in Wesfarmers on October 23, 2024 and sell it today you would earn a total of  197.00  from holding Wesfarmers or generate 2.82% return on investment over 90 days.

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

Wesfarmers  vs.  Ragnar Metals

Wesfarmers

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wesfarmers are ranked lower than 3 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Ragnar Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ragnar Metals 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 technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Wesfarmers and Ragnar Metals

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

The idea behind Wesfarmers and Ragnar Metals 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.