Correlation Between Kerry Group and Wesfarmers

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

By analyzing existing cross correlation between Kerry Group PLC and Wesfarmers Ltd ADR, you can compare the effects of market volatilities on Kerry Group and Wesfarmers 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 Kerry Group with a short position of Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kerry Group and Wesfarmers.

Diversification Opportunities for Kerry Group and Wesfarmers

0.31

Correlation Coefficient

Kerry Group  Wesfarmers

Weak diversification

The 3 months correlation between Kerry and Wesfarmers is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Kerry Group PLC and Wesfarmers Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers ADR and Kerry Group 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 Kerry Group PLC are associated (or correlated) with Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers ADR has no effect on the direction of Kerry Group i.e., Kerry Group and Wesfarmers go up and down completely randomly.

Pair Corralation between Kerry Group and Wesfarmers

Assuming the 90 days horizon Kerry Group PLC is expected to under-perform the Wesfarmers. In addition to that, Kerry Group is 1.09 times more volatile than Wesfarmers Ltd ADR. It trades about -0.01 of its total potential returns per unit of risk. Wesfarmers Ltd ADR is currently generating about 0.0 per unit of volatility. If you would invest  2,360  in Wesfarmers Ltd ADR on September 1, 2024 and sell it today you would lose (14.00) from holding Wesfarmers Ltd ADR or give up 0.59% of portfolio value over 90 days.

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

Kerry Group PLC  vs.  Wesfarmers Ltd ADR

Kerry Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kerry Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Kerry Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wesfarmers ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wesfarmers Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Wesfarmers is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kerry Group and Wesfarmers

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

The idea behind Kerry Group PLC and Wesfarmers Ltd ADR 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..