Correlation Between Australian United and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Australian United 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 Australian United and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian United Investment and Westpac Banking, you can compare the effects of market volatilities on Australian United 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 Australian United with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian United and Westpac Banking.
Diversification Opportunities for Australian United and Westpac Banking
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Australian and Westpac is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Australian United Investment and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Australian United 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 Australian United Investment 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 Australian United i.e., Australian United and Westpac Banking go up and down completely randomly.
Pair Corralation between Australian United and Westpac Banking
Assuming the 90 days trading horizon Australian United Investment is expected to under-perform the Westpac Banking. In addition to that, Australian United is 3.2 times more volatile than Westpac Banking. It trades about -0.12 of its total potential returns per unit of risk. Westpac Banking is currently generating about 0.07 per unit of volatility. If you would invest 10,508 in Westpac Banking on December 12, 2024 and sell it today you would earn a total of 177.00 from holding Westpac Banking or generate 1.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian United Investment vs. Westpac Banking
Performance |
| Timeline |
| Australian United |
| Westpac Banking |
Australian United and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian United and Westpac Banking
The main advantage of trading using opposite Australian United and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian United 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.| Australian United vs. Aurelia Metals | ||
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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