Correlation Between Woolworths Holdings and Aveng

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

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

Diversification Opportunities for Woolworths Holdings and Aveng

-0.34

Correlation Coefficient

Woolworths Holdings  Aveng

Very good diversification

The 3 months correlation between Woolworths and Aveng is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths Holdings and Aveng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aveng and Woolworths Holdings 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 Woolworths Holdings are associated (or correlated) with Aveng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aveng has no effect on the direction of Woolworths Holdings i.e., Woolworths Holdings and Aveng go up and down completely randomly.

Pair Corralation between Woolworths Holdings and Aveng

Assuming the 90 days trading horizon Woolworths Holdings is expected to generate 0.52 times more return on investment than Aveng. However, Woolworths Holdings is 1.92 times less risky than Aveng. It trades about 0.01 of its potential returns per unit of risk. Aveng is currently generating about 0.0 per unit of risk. If you would invest  621,567  in Woolworths Holdings on September 23, 2024 and sell it today you would earn a total of  4,833  from holding Woolworths Holdings or generate 0.78% return on investment over 90 days.

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

Woolworths Holdings  vs.  Aveng

Woolworths Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woolworths Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Woolworths Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aveng

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aveng are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Aveng exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woolworths Holdings and Aveng

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

The idea behind Woolworths Holdings and Aveng 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.