Correlation Between Ocado Group and Woolworths Group

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

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

Diversification Opportunities for Ocado Group and Woolworths Group

0.74

Correlation Coefficient

Ocado Group  Woolworths Group

Poor diversification

The 3 months correlation between Ocado and Woolworths is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ocado Group plc and Woolworths Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Group and Ocado 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 Ocado Group plc are associated (or correlated) with Woolworths Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Group has no effect on the direction of Ocado Group i.e., Ocado Group and Woolworths Group go up and down completely randomly.

Pair Corralation between Ocado Group and Woolworths Group

Assuming the 90 days horizon Ocado Group plc is expected to generate 0.91 times more return on investment than Woolworths Group. However, Ocado Group plc is 1.1 times less risky than Woolworths Group. It trades about -0.14 of its potential returns per unit of risk. Woolworths Group Limited is currently generating about -0.13 per unit of risk. If you would invest  948.00  in Ocado Group plc on September 24, 2024 and sell it today you would lose (193.00) from holding Ocado Group plc or give up 20.36% of portfolio value over 90 days.

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

Ocado Group plc  vs.  Woolworths Group Limited

Ocado Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocado Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Woolworths Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woolworths Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ocado Group and Woolworths Group

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

The idea behind Ocado Group plc and Woolworths Group Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.