Correlation Between Associated British and WH Group
Can any of the company-specific risk be diversified away by investing in both Associated British and WH 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 Associated British and WH Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and WH Group Ltd, you can compare the effects of market volatilities on Associated British and WH 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 Associated British with a short position of WH Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and WH Group.
Diversification Opportunities for Associated British and WH Group
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Associated and WHGLY is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and WH Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WH Group and Associated British 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 Associated British Foods are associated (or correlated) with WH Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WH Group has no effect on the direction of Associated British i.e., Associated British and WH Group go up and down completely randomly.
Pair Corralation between Associated British and WH Group
Assuming the 90 days horizon Associated British Foods is expected to under-perform the WH Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Associated British Foods is 1.35 times less risky than WH Group. The pink sheet trades about -0.02 of its potential returns per unit of risk. The WH Group Ltd is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,340 in WH Group Ltd on January 21, 2024 and sell it today you would earn a total of 34.00 from holding WH Group Ltd or generate 2.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Associated British Foods vs. WH Group Ltd
Performance |
| Timeline |
| Associated British Foods |
| WH Group |
Associated British and WH Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and WH Group
The main advantage of trading using opposite Associated British and WH Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, WH 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 WH Group will offset losses from the drop in WH Group's long position.| Associated British vs. Kellanova | Associated British vs. Lancaster Colony | Associated British vs. The A2 Milk | Associated British vs. Artisan Consumer Goods |
| WH Group vs. Kellanova | WH Group vs. Lancaster Colony | WH Group vs. The A2 Milk | WH Group vs. Artisan Consumer Goods |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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