Correlation Between Alternative Investment and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Alternative Investment and Westpac Banking 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 Alternative Investment and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alternative Investment Trust and Westpac Banking, you can compare the effects of market volatilities on Alternative Investment and Westpac Banking 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 Alternative Investment with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alternative Investment and Westpac Banking.
Diversification Opportunities for Alternative Investment and Westpac Banking
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Alternative and Westpac is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Alternative Investment Trust and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Alternative Investment 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 Alternative Investment Trust are associated (or correlated) with Westpac Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westpac Banking has no effect on the direction of Alternative Investment i.e., Alternative Investment and Westpac Banking go up and down completely randomly.
Pair Corralation between Alternative Investment and Westpac Banking
Assuming the 90 days trading horizon Alternative Investment Trust is expected to under-perform the Westpac Banking. But the stock apears to be less risky and, when comparing its historical volatility, Alternative Investment Trust is 2.06 times less risky than Westpac Banking. The stock trades about -0.21 of its potential returns per unit of risk. The Westpac Banking is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 10,710 in Westpac Banking on September 2, 2024 and sell it today you would lose (19.00) from holding Westpac Banking or give up 0.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alternative Investment Trust vs. Westpac Banking
Performance |
| Timeline |
| Alternative Investment |
| Westpac Banking |
Alternative Investment and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alternative Investment and Westpac Banking
The main advantage of trading using opposite Alternative Investment and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alternative Investment position performs unexpectedly, Westpac Banking 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 Westpac Banking will offset losses from the drop in Westpac Banking's long position.| Alternative Investment vs. WA1 Resources | Alternative Investment vs. Predictive Discovery | Alternative Investment vs. Cooper Metals | Alternative Investment vs. OD6 Metals |
| Westpac Banking vs. Westpac Banking | Westpac Banking vs. Imricor Medical Systems | Westpac Banking vs. Midway | Westpac Banking vs. Aristocrat Leisure |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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