Correlation Between Catalyst Metals and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Catalyst Metals 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 Catalyst Metals and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Catalyst Metals and Westpac Banking, you can compare the effects of market volatilities on Catalyst Metals 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 Catalyst Metals with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalyst Metals and Westpac Banking.
Diversification Opportunities for Catalyst Metals and Westpac Banking
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Catalyst and Westpac is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Catalyst Metals and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Catalyst Metals 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 Catalyst 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 Catalyst Metals i.e., Catalyst Metals and Westpac Banking go up and down completely randomly.
Pair Corralation between Catalyst Metals and Westpac Banking
Assuming the 90 days trading horizon Catalyst Metals is expected to generate 11.99 times more return on investment than Westpac Banking. However, Catalyst Metals is 11.99 times more volatile than Westpac Banking. It trades about 0.19 of its potential returns per unit of risk. Westpac Banking is currently generating about 0.11 per unit of risk. If you would invest 114.00 in Catalyst Metals on August 24, 2024 and sell it today you would earn a total of 192.00 from holding Catalyst Metals or generate 168.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Catalyst Metals vs. Westpac Banking
Performance |
| Timeline |
| Catalyst Metals |
| Westpac Banking |
Catalyst Metals and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Catalyst Metals and Westpac Banking
The main advantage of trading using opposite Catalyst Metals and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalyst Metals 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.| Catalyst Metals vs. Evolution Mining | Catalyst Metals vs. Bluescope Steel | Catalyst Metals vs. Perseus Mining | Catalyst Metals vs. Champion Iron |
| Westpac Banking vs. Champion Iron | Westpac Banking vs. Peel Mining | Westpac Banking vs. Australian Dairy Farms | Westpac Banking vs. Perpetual Credit Income |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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