Correlation Between WOOLWORTHS (WWRSG) and WOOLWORTHS HLDGS

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

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

Diversification Opportunities for WOOLWORTHS (WWRSG) and WOOLWORTHS HLDGS

0.64

Correlation Coefficient

WOOLWORTHS (WWRSG)  WOOLWORTHS HLDGS

Poor diversification

The 3 months correlation between WOOLWORTHS and WOOLWORTHS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding WOOLWORTHS and WOOLWORTHS HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WOOLWORTHS HLDGS and WOOLWORTHS (WWRSG) 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 WOOLWORTHS HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WOOLWORTHS HLDGS has no effect on the direction of WOOLWORTHS (WWRSG) i.e., WOOLWORTHS (WWRSG) and WOOLWORTHS HLDGS go up and down completely randomly.

Pair Corralation between WOOLWORTHS (WWRSG) and WOOLWORTHS HLDGS

Assuming the 90 days trading horizon WOOLWORTHS is expected to generate 0.84 times more return on investment than WOOLWORTHS HLDGS. However, WOOLWORTHS is 1.18 times less risky than WOOLWORTHS HLDGS. It trades about -0.04 of its potential returns per unit of risk. WOOLWORTHS HLDGS is currently generating about -0.13 per unit of risk. If you would invest  1,787  in WOOLWORTHS on December 27, 2024 and sell it today you would lose (77.00) from holding WOOLWORTHS or give up 4.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

WOOLWORTHS  vs.  WOOLWORTHS HLDGS

WOOLWORTHS (WWRSG)

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 (WWRSG) is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

WOOLWORTHS HLDGS

Risk-Adjusted Performance

Very Weak

Over the last 90 days WOOLWORTHS HLDGS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with WOOLWORTHS (WWRSG) and WOOLWORTHS HLDGS

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

The idea behind WOOLWORTHS and WOOLWORTHS HLDGS 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.