Correlation Between Woolworths Holdings and Pick N

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

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

Diversification Opportunities for Woolworths Holdings and Pick N

-0.65

Correlation Coefficient

Woolworths Holdings  Pick N

Excellent diversification

The 3 months correlation between Woolworths and Pick is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths Holdings and Pick N Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pick N Pay 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 Pick N. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pick N Pay has no effect on the direction of Woolworths Holdings i.e., Woolworths Holdings and Pick N go up and down completely randomly.

Pair Corralation between Woolworths Holdings and Pick N

Assuming the 90 days trading horizon Woolworths Holdings is expected to under-perform the Pick N. But the stock apears to be less risky and, when comparing its historical volatility, Woolworths Holdings is 1.02 times less risky than Pick N. The stock trades about -0.07 of its potential returns per unit of risk. The Pick N Pay is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  260,900  in Pick N Pay on October 20, 2024 and sell it today you would earn a total of  57,100  from holding Pick N Pay or generate 21.89% return on investment over 90 days.

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

Woolworths Holdings  vs.  Pick N Pay

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pick N Pay

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pick N Pay are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Pick N exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woolworths Holdings and Pick N

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

The idea behind Woolworths Holdings and Pick N Pay 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.