Correlation Between Ford and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Westpac Banking Corp, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Westpac Banking.
Diversification Opportunities for Ford and Westpac Banking
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and Westpac is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Westpac Banking Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking Corp and Ford 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 Ford Motor 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 Corp has no effect on the direction of Ford i.e., Ford and Westpac Banking go up and down completely randomly.
Pair Corralation between Ford and Westpac Banking
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Westpac Banking. In addition to that, Ford is 7.38 times more volatile than Westpac Banking Corp. It trades about -0.02 of its total potential returns per unit of risk. Westpac Banking Corp is currently generating about 0.06 per unit of volatility. If you would invest 10,035 in Westpac Banking Corp on October 24, 2024 and sell it today you would earn a total of 134.00 from holding Westpac Banking Corp or generate 1.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 96.43% |
| Values | Daily Returns |
Ford Motor vs. Westpac Banking Corp
Performance |
| Timeline |
| Ford Motor |
| Westpac Banking Corp |
Ford and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Westpac Banking
The main advantage of trading using opposite Ford and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and Westpac Banking Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Westpac Banking vs. Embark Education Group | Westpac Banking vs. Centrex Metals | Westpac Banking vs. Skycity Entertainment Group | Westpac Banking vs. Sports Entertainment 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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