Correlation Between G8 Education and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both G8 Education 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 G8 Education and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between G8 Education and Westpac Banking, you can compare the effects of market volatilities on G8 Education 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 G8 Education with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of G8 Education and Westpac Banking.
Diversification Opportunities for G8 Education and Westpac Banking
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between GEM and Westpac is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding G8 Education and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and G8 Education 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 G8 Education 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 G8 Education i.e., G8 Education and Westpac Banking go up and down completely randomly.
Pair Corralation between G8 Education and Westpac Banking
Assuming the 90 days trading horizon G8 Education is expected to generate 5.64 times more return on investment than Westpac Banking. However, G8 Education is 5.64 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 0.1 per unit of risk. If you would invest 118.00 in G8 Education on November 6, 2024 and sell it today you would earn a total of 21.00 from holding G8 Education or generate 17.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 56.02% |
| Values | Daily Returns |
G8 Education vs. Westpac Banking
Performance |
| Timeline |
| G8 Education |
| Westpac Banking |
G8 Education and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with G8 Education and Westpac Banking
The main advantage of trading using opposite G8 Education and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G8 Education 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.| G8 Education vs. Sayona Mining | G8 Education vs. Bluescope Steel | G8 Education vs. Peel Mining | G8 Education vs. Ironbark Capital |
| Westpac Banking vs. Cleanaway Waste Management | Westpac Banking vs. Carnegie Clean Energy | Westpac Banking vs. Dalaroo Metals | Westpac Banking vs. DMC Mining |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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