Correlation Between Perpetual Credit and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Perpetual Credit 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 Perpetual Credit and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Perpetual Credit Income and Westpac Banking, you can compare the effects of market volatilities on Perpetual Credit 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 Perpetual Credit with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perpetual Credit and Westpac Banking.
Diversification Opportunities for Perpetual Credit and Westpac Banking
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Perpetual and Westpac is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Perpetual Credit Income and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Perpetual Credit 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 Perpetual Credit Income 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 Perpetual Credit i.e., Perpetual Credit and Westpac Banking go up and down completely randomly.
Pair Corralation between Perpetual Credit and Westpac Banking
Assuming the 90 days trading horizon Perpetual Credit Income is expected to generate 2.89 times more return on investment than Westpac Banking. However, Perpetual Credit is 2.89 times more volatile than Westpac Banking. It trades about 0.04 of its potential returns per unit of risk. Westpac Banking is currently generating about 0.0 per unit of risk. If you would invest 115.00 in Perpetual Credit Income on September 2, 2024 and sell it today you would earn a total of 1.00 from holding Perpetual Credit Income or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Perpetual Credit Income vs. Westpac Banking
Performance |
| Timeline |
| Perpetual Credit Income |
| Westpac Banking |
Perpetual Credit and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Perpetual Credit and Westpac Banking
The main advantage of trading using opposite Perpetual Credit and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perpetual Credit 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.| Perpetual Credit vs. ABACUS STORAGE KING | Perpetual Credit vs. Midway | Perpetual Credit vs. Aristocrat Leisure | Perpetual Credit vs. Imricor Medical Systems |
| Westpac Banking vs. Imricor Medical Systems | Westpac Banking vs. Midway | Westpac Banking vs. Betmakers Technology Group | Westpac Banking vs. SportsHero |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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