Correlation Between Neurotech International and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Neurotech International 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 Neurotech International and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Neurotech International and Westpac Banking Corp, you can compare the effects of market volatilities on Neurotech International 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 Neurotech International with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neurotech International and Westpac Banking.
Diversification Opportunities for Neurotech International and Westpac Banking
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Neurotech and Westpac is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Neurotech International 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 Neurotech International 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 Neurotech 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 Neurotech International i.e., Neurotech International and Westpac Banking go up and down completely randomly.
Pair Corralation between Neurotech International and Westpac Banking
Assuming the 90 days trading horizon Neurotech International is expected to generate 2.55 times less return on investment than Westpac Banking. In addition to that, Neurotech International is 3.34 times more volatile than Westpac Banking Corp. It trades about 0.01 of its total potential returns per unit of risk. Westpac Banking Corp is currently generating about 0.11 per unit of volatility. If you would invest 3,086 in Westpac Banking Corp on September 2, 2024 and sell it today you would earn a total of 250.00 from holding Westpac Banking Corp or generate 8.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Neurotech International vs. Westpac Banking Corp
Performance |
| Timeline |
| Neurotech International |
| Westpac Banking Corp |
Neurotech International and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Neurotech International and Westpac Banking
The main advantage of trading using opposite Neurotech International and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neurotech International 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 Neurotech International 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.
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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