Correlation Between WOOLWORTHS and CarsalesCom

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

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

Diversification Opportunities for WOOLWORTHS and CarsalesCom

-0.33

Correlation Coefficient

WOOLWORTHS  CarsalesCom

Very good diversification

The 3 months correlation between WOOLWORTHS and CarsalesCom is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding WOOLWORTHS and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of WOOLWORTHS i.e., WOOLWORTHS and CarsalesCom go up and down completely randomly.

Pair Corralation between WOOLWORTHS and CarsalesCom

Assuming the 90 days trading horizon WOOLWORTHS is expected to under-perform the CarsalesCom. But the stock apears to be less risky and, when comparing its historical volatility, WOOLWORTHS is 1.22 times less risky than CarsalesCom. The stock trades about -0.12 of its potential returns per unit of risk. The CarsalesCom is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,220  in CarsalesCom on October 25, 2024 and sell it today you would earn a total of  120.00  from holding CarsalesCom or generate 5.41% return on investment over 90 days.

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

WOOLWORTHS  vs.  CarsalesCom

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 unsteady 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.

CarsalesCom

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CarsalesCom may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WOOLWORTHS and CarsalesCom

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

The idea behind WOOLWORTHS and CarsalesCom 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.