Correlation Between National Storage and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both National Storage 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 National Storage and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Storage REIT and Westpac Banking, you can compare the effects of market volatilities on National Storage 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 National Storage with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Storage and Westpac Banking.
Diversification Opportunities for National Storage and Westpac Banking
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between National and Westpac is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding National Storage REIT and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and National Storage 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 National Storage REIT 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 National Storage i.e., National Storage and Westpac Banking go up and down completely randomly.
Pair Corralation between National Storage and Westpac Banking
Assuming the 90 days trading horizon National Storage is expected to generate 1.06 times less return on investment than Westpac Banking. In addition to that, National Storage is 3.71 times more volatile than Westpac Banking. It trades about 0.03 of its total potential returns per unit of risk. Westpac Banking is currently generating about 0.11 per unit of volatility. If you would invest 9,654 in Westpac Banking on October 14, 2024 and sell it today you would earn a total of 917.00 from holding Westpac Banking or generate 9.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 53.0% |
| Values | Daily Returns |
National Storage REIT vs. Westpac Banking
Performance |
| Timeline |
| National Storage REIT |
| Westpac Banking |
National Storage and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Storage and Westpac Banking
The main advantage of trading using opposite National Storage and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Storage 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.| National Storage vs. WiseTech Global Limited | National Storage vs. Queste Communications | National Storage vs. RLF AgTech | National Storage vs. Air New Zealand |
| Westpac Banking vs. National Storage REIT | Westpac Banking vs. Genetic Technologies | Westpac Banking vs. Thorney Technologies | Westpac Banking vs. Step One Clothing |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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