Correlation Between EQ Resources and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both EQ Resources 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 EQ Resources and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EQ Resources and Westpac Banking, you can compare the effects of market volatilities on EQ Resources 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 EQ Resources with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of EQ Resources and Westpac Banking.
Diversification Opportunities for EQ Resources and Westpac Banking
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EQR and Westpac is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding EQ Resources and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and EQ Resources 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 EQ Resources 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 EQ Resources i.e., EQ Resources and Westpac Banking go up and down completely randomly.
Pair Corralation between EQ Resources and Westpac Banking
Assuming the 90 days trading horizon EQ Resources is expected to generate 16.01 times more return on investment than Westpac Banking. However, EQ Resources is 16.01 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 0.07 per unit of risk. If you would invest 6.20 in EQ Resources on November 28, 2024 and sell it today you would lose (1.80) from holding EQ Resources or give up 29.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EQ Resources vs. Westpac Banking
Performance |
| Timeline |
| EQ Resources |
| Westpac Banking |
EQ Resources and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EQ Resources and Westpac Banking
The main advantage of trading using opposite EQ Resources and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EQ Resources 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.| EQ Resources vs. Sky Metals | EQ Resources vs. Falcon Metals | EQ Resources vs. FireFly Metals | EQ Resources vs. TPG Telecom |
| Westpac Banking vs. Australian Agricultural | Westpac Banking vs. Centaurus Metals | Westpac Banking vs. Polymetals Resources | Westpac Banking vs. MA Financial Group |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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