Correlation Between Clime Investment and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Clime Investment 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 Clime Investment and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clime Investment Management and Westpac Banking, you can compare the effects of market volatilities on Clime Investment 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 Clime Investment with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clime Investment and Westpac Banking.
Diversification Opportunities for Clime Investment and Westpac Banking
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Clime and Westpac is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Clime Investment Management and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Clime Investment 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 Clime Investment Management 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 Clime Investment i.e., Clime Investment and Westpac Banking go up and down completely randomly.
Pair Corralation between Clime Investment and Westpac Banking
Assuming the 90 days trading horizon Clime Investment Management is expected to generate 6.66 times more return on investment than Westpac Banking. However, Clime Investment is 6.66 times more volatile than Westpac Banking. It trades about 0.04 of its potential returns per unit of risk. Westpac Banking is currently generating about 0.07 per unit of risk. If you would invest 35.00 in Clime Investment Management on December 12, 2024 and sell it today you would earn a total of 2.00 from holding Clime Investment Management or generate 5.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Clime Investment Management vs. Westpac Banking
Performance |
| Timeline |
| Clime Investment Man |
| Westpac Banking |
Clime Investment and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clime Investment and Westpac Banking
The main advantage of trading using opposite Clime Investment and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clime Investment 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.| Clime Investment vs. Southern Cross Media | ||
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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