Correlation Between Intuitive Machines and Wesfarmers

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

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

Diversification Opportunities for Intuitive Machines and Wesfarmers

-0.2

Correlation Coefficient

Intuitive Machines  Wesfarmers

Good diversification

The 3 months correlation between Intuitive and Wesfarmers is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Intuitive Machines and Wesfarmers Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers ADR and Intuitive Machines 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 Intuitive Machines 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 Intuitive Machines i.e., Intuitive Machines and Wesfarmers go up and down completely randomly.

Pair Corralation between Intuitive Machines and Wesfarmers

Given the investment horizon of 90 days Intuitive Machines is expected to generate 5.77 times more return on investment than Wesfarmers. However, Intuitive Machines is 5.77 times more volatile than Wesfarmers Ltd ADR. It trades about 0.25 of its potential returns per unit of risk. Wesfarmers Ltd ADR is currently generating about 0.0 per unit of risk. If you would invest  520.00  in Intuitive Machines on August 31, 2024 and sell it today you would earn a total of  1,115  from holding Intuitive Machines or generate 214.42% return on investment over 90 days.

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

Intuitive Machines  vs.  Wesfarmers Ltd ADR

Intuitive Machines

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Intuitive Machines are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Intuitive Machines reported solid returns over the last few months and may actually be approaching a breakup point.

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Intuitive Machines and Wesfarmers

The main advantage of trading using opposite Intuitive Machines and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intuitive Machines 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 Intuitive Machines 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.