Correlation Between Medical Developments and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Medical Developments 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 Medical Developments and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medical Developments International and Westpac Banking Corp, you can compare the effects of market volatilities on Medical Developments 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 Medical Developments with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medical Developments and Westpac Banking.
Diversification Opportunities for Medical Developments and Westpac Banking
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Medical and Westpac is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Medical Developments Internati 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 Medical Developments 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 Medical Developments International 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 Medical Developments i.e., Medical Developments and Westpac Banking go up and down completely randomly.
Pair Corralation between Medical Developments and Westpac Banking
Assuming the 90 days trading horizon Medical Developments International is expected to under-perform the Westpac Banking. In addition to that, Medical Developments is 1.94 times more volatile than Westpac Banking Corp. It trades about -0.2 of its total potential returns per unit of risk. Westpac Banking Corp is currently generating about 0.22 per unit of volatility. If you would invest 3,140 in Westpac Banking Corp on August 29, 2024 and sell it today you would earn a total of 155.00 from holding Westpac Banking Corp or generate 4.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Medical Developments Internati vs. Westpac Banking Corp
Performance |
| Timeline |
| Medical Developments |
| Westpac Banking Corp |
Medical Developments and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Medical Developments and Westpac Banking
The main advantage of trading using opposite Medical Developments and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Developments 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.| Medical Developments vs. Energy Resources | Medical Developments vs. 88 Energy | Medical Developments vs. Amani Gold | Medical Developments vs. A1 Investments Resources |
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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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