Correlation Between Stelar Metals and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Stelar Metals 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 Stelar Metals and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stelar Metals and Westpac Banking, you can compare the effects of market volatilities on Stelar Metals 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 Stelar Metals with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stelar Metals and Westpac Banking.
Diversification Opportunities for Stelar Metals and Westpac Banking
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Stelar and Westpac is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Stelar Metals and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Stelar Metals 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 Stelar Metals 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 Stelar Metals i.e., Stelar Metals and Westpac Banking go up and down completely randomly.
Pair Corralation between Stelar Metals and Westpac Banking
Assuming the 90 days trading horizon Stelar Metals is expected to under-perform the Westpac Banking. In addition to that, Stelar Metals is 12.39 times more volatile than Westpac Banking. It trades about -0.29 of its total potential returns per unit of risk. Westpac Banking is currently generating about -0.3 per unit of volatility. If you would invest 10,760 in Westpac Banking on August 29, 2024 and sell it today you would lose (178.00) from holding Westpac Banking or give up 1.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stelar Metals vs. Westpac Banking
Performance |
| Timeline |
| Stelar Metals |
| Westpac Banking |
Stelar Metals and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stelar Metals and Westpac Banking
The main advantage of trading using opposite Stelar Metals and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stelar Metals 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.| Stelar Metals vs. Northern Star Resources | Stelar Metals vs. Evolution Mining | Stelar Metals vs. Bluescope Steel | Stelar Metals vs. Sandfire Resources NL |
| Westpac Banking vs. Origin Energy | Westpac Banking vs. Insurance Australia Group | Westpac Banking vs. Hotel Property Investments | Westpac Banking vs. Ecofibre |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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