Correlation Between Commonwealth Bank and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank 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 Commonwealth Bank and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank of and Westpac Banking, you can compare the effects of market volatilities on Commonwealth Bank 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 Commonwealth Bank with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Westpac Banking.
Diversification Opportunities for Commonwealth Bank and Westpac Banking
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Commonwealth and Westpac is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Commonwealth Bank 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 Commonwealth Bank of 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 Commonwealth Bank i.e., Commonwealth Bank and Westpac Banking go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Westpac Banking
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 1.75 times less return on investment than Westpac Banking. In addition to that, Commonwealth Bank is 1.15 times more volatile than Westpac Banking. It trades about 0.04 of its total potential returns per unit of risk. Westpac Banking is currently generating about 0.08 per unit of volatility. If you would invest 9,733 in Westpac Banking on August 25, 2024 and sell it today you would earn a total of 299.00 from holding Westpac Banking or generate 3.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. Westpac Banking
Performance |
| Timeline |
| Commonwealth Bank |
| Westpac Banking |
Commonwealth Bank and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Westpac Banking
The main advantage of trading using opposite Commonwealth Bank and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank 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.| Commonwealth Bank vs. Westpac Banking | Commonwealth Bank vs. Commonwealth Bank | Commonwealth Bank vs. Commonwealth Bank of | Commonwealth Bank vs. Commonwealth Bank of |
| Westpac Banking vs. Perseus Mining | Westpac Banking vs. Black Rock Mining | Westpac Banking vs. Aeon Metals | Westpac Banking vs. Andean Silver Limited |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Commodity Directory Find actively traded commodities issued by global exchanges |