Correlation Between Woolworths and Genesis Energy

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

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

Diversification Opportunities for Woolworths and Genesis Energy

0.38

Correlation Coefficient

Woolworths  Genesis Energy

Weak diversification

The 3 months correlation between Woolworths and Genesis is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths and Genesis Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesis Energy and Woolworths 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 are associated (or correlated) with Genesis Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesis Energy has no effect on the direction of Woolworths i.e., Woolworths and Genesis Energy go up and down completely randomly.

Pair Corralation between Woolworths and Genesis Energy

Assuming the 90 days trading horizon Woolworths is expected to under-perform the Genesis Energy. But the stock apears to be less risky and, when comparing its historical volatility, Woolworths is 1.69 times less risky than Genesis Energy. The stock trades about -0.02 of its potential returns per unit of risk. The Genesis Energy is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  198.00  in Genesis Energy on December 25, 2024 and sell it today you would lose (3.00) from holding Genesis Energy or give up 1.52% of portfolio value over 90 days.

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

Woolworths  vs.  Genesis Energy

Woolworths

Risk-Adjusted Performance

Very Weak

Over the last 90 days Woolworths has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Woolworths is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Genesis Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Genesis Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Genesis Energy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Woolworths and Genesis Energy

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

The idea behind Woolworths and Genesis Energy 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.