Correlation Between Woolworths and Nsx

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

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

Diversification Opportunities for Woolworths and Nsx

-0.52

Correlation Coefficient

Woolworths  Nsx

Excellent diversification

The 3 months correlation between Woolworths and Nsx is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths and Nsx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nsx 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 Nsx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nsx has no effect on the direction of Woolworths i.e., Woolworths and Nsx go up and down completely randomly.

Pair Corralation between Woolworths and Nsx

Assuming the 90 days trading horizon Woolworths is expected to under-perform the Nsx. But the stock apears to be less risky and, when comparing its historical volatility, Woolworths is 6.67 times less risky than Nsx. The stock trades about -0.15 of its potential returns per unit of risk. The Nsx is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Nsx on September 4, 2024 and sell it today you would earn a total of  1.10  from holding Nsx or generate 73.33% return on investment over 90 days.

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

Woolworths  vs.  Nsx

Woolworths

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nsx

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nsx are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nsx unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woolworths and Nsx

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

The idea behind Woolworths and Nsx 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.