Correlation Between Wilmar International and MOWI ASA

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

By analyzing existing cross correlation between Wilmar International Limited and MOWI ASA SPADR, you can compare the effects of market volatilities on Wilmar International and MOWI ASA 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 Wilmar International with a short position of MOWI ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilmar International and MOWI ASA.

Diversification Opportunities for Wilmar International and MOWI ASA

-0.42

Correlation Coefficient

Wilmar International  MOWI ASA

Very good diversification

The 3 months correlation between Wilmar and MOWI is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Wilmar International Limited and MOWI ASA SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOWI ASA SPADR and Wilmar International 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 Wilmar International Limited are associated (or correlated) with MOWI ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOWI ASA SPADR has no effect on the direction of Wilmar International i.e., Wilmar International and MOWI ASA go up and down completely randomly.

Pair Corralation between Wilmar International and MOWI ASA

Assuming the 90 days trading horizon Wilmar International is expected to generate 2.17 times less return on investment than MOWI ASA. In addition to that, Wilmar International is 1.37 times more volatile than MOWI ASA SPADR. It trades about 0.02 of its total potential returns per unit of risk. MOWI ASA SPADR is currently generating about 0.06 per unit of volatility. If you would invest  1,547  in MOWI ASA SPADR on September 23, 2024 and sell it today you would earn a total of  73.00  from holding MOWI ASA SPADR or generate 4.72% return on investment over 90 days.

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

Wilmar International Limited  vs.  MOWI ASA SPADR

Wilmar International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wilmar International Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Wilmar International is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

MOWI ASA SPADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MOWI ASA SPADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, MOWI ASA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Wilmar International and MOWI ASA

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

The idea behind Wilmar International Limited and MOWI ASA SPADR 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.