Correlation Between Retailors and Willy Food

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

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

Diversification Opportunities for Retailors and Willy Food

0.9

Correlation Coefficient

Retailors  Willy Food

Almost no diversification

The 3 months correlation between Retailors and Willy is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Retailors and Willy Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willy Food and Retailors 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 Retailors are associated (or correlated) with Willy Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willy Food has no effect on the direction of Retailors i.e., Retailors and Willy Food go up and down completely randomly.

Pair Corralation between Retailors and Willy Food

Assuming the 90 days trading horizon Retailors is expected to generate 1.71 times less return on investment than Willy Food. But when comparing it to its historical volatility, Retailors is 1.01 times less risky than Willy Food. It trades about 0.18 of its potential returns per unit of risk. Willy Food is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  191,800  in Willy Food on September 18, 2024 and sell it today you would earn a total of  82,500  from holding Willy Food or generate 43.01% return on investment over 90 days.

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

Retailors  vs.  Willy Food

Retailors

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Retailors are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Retailors sustained solid returns over the last few months and may actually be approaching a breakup point.

Willy Food

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Willy Food are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Willy Food sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Retailors and Willy Food

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

The idea behind Retailors and Willy Food 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.