Correlation Between Woolworths Holdings and We Buy

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

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

Diversification Opportunities for Woolworths Holdings and We Buy

-0.49

Correlation Coefficient

Woolworths Holdings  We Buy

Very good diversification

The 3 months correlation between Woolworths and WBC is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths Holdings and We Buy Cars in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on We Buy Cars 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 We Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of We Buy Cars has no effect on the direction of Woolworths Holdings i.e., Woolworths Holdings and We Buy go up and down completely randomly.

Pair Corralation between Woolworths Holdings and We Buy

Assuming the 90 days trading horizon Woolworths Holdings is expected to generate 0.57 times more return on investment than We Buy. However, Woolworths Holdings is 1.74 times less risky than We Buy. It trades about -0.26 of its potential returns per unit of risk. We Buy Cars is currently generating about -0.2 per unit of risk. If you would invest  644,600  in Woolworths Holdings on October 11, 2024 and sell it today you would lose (42,000) from holding Woolworths Holdings or give up 6.52% of portfolio value over 90 days.

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

Woolworths Holdings  vs.  We Buy Cars

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.

We Buy Cars

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in We Buy Cars are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, We Buy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woolworths Holdings and We Buy

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

The idea behind Woolworths Holdings and We Buy Cars 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.