Correlation Between Farm Pride and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Farm Pride 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 Farm Pride and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farm Pride Foods and Westpac Banking, you can compare the effects of market volatilities on Farm Pride 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 Farm Pride with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farm Pride and Westpac Banking.
Diversification Opportunities for Farm Pride and Westpac Banking
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Farm and Westpac is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Farm Pride Foods and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Farm Pride 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 Farm Pride Foods 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 Farm Pride i.e., Farm Pride and Westpac Banking go up and down completely randomly.
Pair Corralation between Farm Pride and Westpac Banking
Assuming the 90 days trading horizon Farm Pride Foods is expected to generate 17.01 times more return on investment than Westpac Banking. However, Farm Pride is 17.01 times more volatile than Westpac Banking. It trades about 0.03 of its potential returns per unit of risk. Westpac Banking is currently generating about 0.06 per unit of risk. If you would invest 12.00 in Farm Pride Foods on October 16, 2024 and sell it today you would earn a total of 2.00 from holding Farm Pride Foods or generate 16.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farm Pride Foods vs. Westpac Banking
Performance |
| Timeline |
| Farm Pride Foods |
| Westpac Banking |
Farm Pride and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farm Pride and Westpac Banking
The main advantage of trading using opposite Farm Pride and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farm Pride 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.| Farm Pride vs. Aurelia Metals | Farm Pride vs. Embark Education Group | Farm Pride vs. Mount Gibson Iron | Farm Pride vs. Ironbark Capital |
| Westpac Banking vs. Farm Pride Foods | Westpac Banking vs. Qbe Insurance Group | Westpac Banking vs. MotorCycle Holdings | Westpac Banking vs. Premier Investments |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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