Correlation Between Bank of America and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Westpac Banking, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Westpac Banking.
Diversification Opportunities for Bank of America and Westpac Banking
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Westpac is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and Westpac Banking go up and down completely randomly.
Pair Corralation between Bank of America and Westpac Banking
Assuming the 90 days trading horizon Bank of America is expected to generate 0.09 times more return on investment than Westpac Banking. However, Bank of America is 11.17 times less risky than Westpac Banking. It trades about 0.27 of its potential returns per unit of risk. Westpac Banking is currently generating about 0.02 per unit of risk. If you would invest 2,218 in Bank of America on November 5, 2024 and sell it today you would earn a total of 58.00 from holding Bank of America or generate 2.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Westpac Banking
Performance |
| Timeline |
| Bank of America |
| Westpac Banking |
Bank of America and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Westpac Banking
The main advantage of trading using opposite Bank of America and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. Bank of America | Bank of America vs. Wells Fargo | Bank of America vs. Bank of America | Bank of America vs. China Construction Bank |
| Westpac Banking vs. Commonwealth Bank of | Westpac Banking vs. Svenska Handelsbanken PK | Westpac Banking vs. ANZ Group Holdings | Westpac Banking vs. National Australia Bank |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |