Correlation Between Woolworths and Mayfield Childcare

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

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

Diversification Opportunities for Woolworths and Mayfield Childcare

0.56

Correlation Coefficient

Woolworths  Mayfield Childcare

Very weak diversification

The 3 months correlation between Woolworths and Mayfield is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths and Mayfield Childcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mayfield Childcare and Woolworths 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 Woolworths are associated (or correlated) with Mayfield Childcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mayfield Childcare has no effect on the direction of Woolworths i.e., Woolworths and Mayfield Childcare go up and down completely randomly.

Pair Corralation between Woolworths and Mayfield Childcare

Assuming the 90 days trading horizon Woolworths is expected to generate 0.34 times more return on investment than Mayfield Childcare. However, Woolworths is 2.98 times less risky than Mayfield Childcare. It trades about 0.1 of its potential returns per unit of risk. Mayfield Childcare is currently generating about -0.2 per unit of risk. If you would invest  2,989  in Woolworths on September 4, 2024 and sell it today you would earn a total of  43.00  from holding Woolworths or generate 1.44% return on investment over 90 days.

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

Woolworths  vs.  Mayfield Childcare

Woolworths

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woolworths has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Mayfield Childcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mayfield Childcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Woolworths and Mayfield Childcare

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

The idea behind Woolworths and Mayfield Childcare 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.

Check out your portfolio center.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.