Correlation Between Woolworths Holdings and Mr Price

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

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

Diversification Opportunities for Woolworths Holdings and Mr Price

-0.47

Correlation Coefficient

Woolworths Holdings  Mr Price

Very good diversification

The 3 months correlation between Woolworths and MRP is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths Holdings and Mr Price Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr Price Group 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 Mr Price. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr Price Group has no effect on the direction of Woolworths Holdings i.e., Woolworths Holdings and Mr Price go up and down completely randomly.

Pair Corralation between Woolworths Holdings and Mr Price

Assuming the 90 days trading horizon Woolworths Holdings is expected to under-perform the Mr Price. But the stock apears to be less risky and, when comparing its historical volatility, Woolworths Holdings is 1.18 times less risky than Mr Price. The stock trades about -0.19 of its potential returns per unit of risk. The Mr Price Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,922,873  in Mr Price Group on October 10, 2024 and sell it today you would earn a total of  1,027  from holding Mr Price Group or generate 0.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Woolworths Holdings  vs.  Mr Price Group

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.

Mr Price Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Price Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Mr Price exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woolworths Holdings and Mr Price

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

The idea behind Woolworths Holdings and Mr Price 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.