Correlation Between Super Retail and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both Super Retail 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 Super Retail and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Super Retail Group and Westpac Banking, you can compare the effects of market volatilities on Super Retail 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 Super Retail with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Super Retail and Westpac Banking.
Diversification Opportunities for Super Retail and Westpac Banking
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Super and Westpac is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Super Retail Group and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Super Retail 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 Super Retail Group 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 Super Retail i.e., Super Retail and Westpac Banking go up and down completely randomly.
Pair Corralation between Super Retail and Westpac Banking
Assuming the 90 days trading horizon Super Retail Group is expected to generate 5.2 times more return on investment than Westpac Banking. However, Super Retail is 5.2 times more volatile than Westpac Banking. It trades about 0.05 of its potential returns per unit of risk. Westpac Banking is currently generating about 0.1 per unit of risk. If you would invest 1,080 in Super Retail Group on November 6, 2024 and sell it today you would earn a total of 488.00 from holding Super Retail Group or generate 45.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 56.02% |
| Values | Daily Returns |
Super Retail Group vs. Westpac Banking
Performance |
| Timeline |
| Super Retail Group |
| Westpac Banking |
Super Retail and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Super Retail and Westpac Banking
The main advantage of trading using opposite Super Retail and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Super Retail 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.| Super Retail vs. Kneomedia | Super Retail vs. Southern Cross Media | Super Retail vs. Austco Healthcare | Super Retail vs. EVE Health Group |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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