Correlation Between American West and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both American West 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 American West and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American West Metals and Westpac Banking, you can compare the effects of market volatilities on American West 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 American West with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of American West and Westpac Banking.
Diversification Opportunities for American West and Westpac Banking
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Westpac is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding American West Metals and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and American West 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 American West Metals 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 American West i.e., American West and Westpac Banking go up and down completely randomly.
Pair Corralation between American West and Westpac Banking
Assuming the 90 days trading horizon American West Metals is expected to under-perform the Westpac Banking. In addition to that, American West is 14.47 times more volatile than Westpac Banking. It trades about -0.08 of its total potential returns per unit of risk. Westpac Banking is currently generating about 0.1 per unit of volatility. If you would invest 10,043 in Westpac Banking on September 3, 2024 and sell it today you would earn a total of 648.00 from holding Westpac Banking or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American West Metals vs. Westpac Banking
Performance |
| Timeline |
| American West Metals |
| Westpac Banking |
American West and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American West and Westpac Banking
The main advantage of trading using opposite American West and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American West 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.| American West vs. Northern Star Resources | American West vs. Evolution Mining | American West vs. Bluescope Steel | American West vs. Aneka Tambang Tbk |
| Westpac Banking vs. Westpac Banking | Westpac Banking vs. Champion Iron | Westpac Banking vs. iShares Global Healthcare | Westpac Banking vs. Ridley |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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