Correlation Between Bio Gene and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Bio Gene 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 Bio Gene and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bio Gene Technology and Westpac Banking, you can compare the effects of market volatilities on Bio Gene 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 Bio Gene with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bio Gene and Westpac Banking.
Diversification Opportunities for Bio Gene and Westpac Banking
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bio and Westpac is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Bio Gene Technology and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Bio Gene 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 Bio Gene Technology 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 Bio Gene i.e., Bio Gene and Westpac Banking go up and down completely randomly.
Pair Corralation between Bio Gene and Westpac Banking
Assuming the 90 days trading horizon Bio Gene Technology is expected to generate 15.8 times more return on investment than Westpac Banking. However, Bio Gene is 15.8 times more volatile than Westpac Banking. It trades about 0.01 of its potential returns per unit of risk. Westpac Banking is currently generating about 0.06 per unit of risk. If you would invest 5.40 in Bio Gene Technology on September 4, 2024 and sell it today you would lose (1.20) from holding Bio Gene Technology or give up 22.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bio Gene Technology vs. Westpac Banking
Performance |
| Timeline |
| Bio Gene Technology |
| Westpac Banking |
Bio Gene and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bio Gene and Westpac Banking
The main advantage of trading using opposite Bio Gene and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bio Gene 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.| Bio Gene vs. Northern Star Resources | Bio Gene vs. Evolution Mining | Bio Gene vs. Bluescope Steel | Bio Gene vs. Sandfire Resources NL |
| Westpac Banking vs. Neurotech International | Westpac Banking vs. WiseTech Global Limited | Westpac Banking vs. Bio Gene Technology | Westpac Banking vs. Ainsworth Game Technology |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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