Correlation Between Woolworths Group and Village Super

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

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

Diversification Opportunities for Woolworths Group and Village Super

-0.14

Correlation Coefficient

Woolworths Group  Village Super

Good diversification

The 3 months correlation between Woolworths and Village is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths Group Limited and Village Super Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Super Market and Woolworths Group 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 Group Limited are associated (or correlated) with Village Super. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Super Market has no effect on the direction of Woolworths Group i.e., Woolworths Group and Village Super go up and down completely randomly.

Pair Corralation between Woolworths Group and Village Super

Assuming the 90 days horizon Woolworths Group is expected to generate 1.64 times less return on investment than Village Super. In addition to that, Woolworths Group is 2.6 times more volatile than Village Super Market. It trades about 0.03 of its total potential returns per unit of risk. Village Super Market is currently generating about 0.15 per unit of volatility. If you would invest  3,132  in Village Super Market on December 30, 2024 and sell it today you would earn a total of  565.00  from holding Village Super Market or generate 18.04% return on investment over 90 days.

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

Woolworths Group Limited  vs.  Village Super Market

Woolworths Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Woolworths Group Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Woolworths Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Village Super Market

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Village Super Market are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Village Super sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woolworths Group and Village Super

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

The idea behind Woolworths Group Limited and Village Super Market 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.