Correlation Between Homeco Daily and Woolworths

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

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

Diversification Opportunities for Homeco Daily and Woolworths

0.59

Correlation Coefficient

Homeco Daily  Woolworths

Very weak diversification

The 3 months correlation between Homeco and Woolworths is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Homeco Daily Needs and Woolworths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths and Homeco Daily 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 Homeco Daily Needs are associated (or correlated) with Woolworths. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths has no effect on the direction of Homeco Daily i.e., Homeco Daily and Woolworths go up and down completely randomly.

Pair Corralation between Homeco Daily and Woolworths

Assuming the 90 days trading horizon Homeco Daily is expected to generate 13.11 times less return on investment than Woolworths. In addition to that, Homeco Daily is 1.29 times more volatile than Woolworths. It trades about 0.0 of its total potential returns per unit of risk. Woolworths is currently generating about 0.07 per unit of volatility. If you would invest  2,989  in Woolworths on September 5, 2024 and sell it today you would earn a total of  32.00  from holding Woolworths or generate 1.07% return on investment over 90 days.

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

Homeco Daily Needs  vs.  Woolworths

Homeco Daily Needs

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Homeco Daily and Woolworths

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

The idea behind Homeco Daily Needs and Woolworths 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.