Correlation Between Westpac Banking and Energy Technologies
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Energy Technologies 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 Westpac Banking and Energy Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking Corp and Energy Technologies Limited, you can compare the effects of market volatilities on Westpac Banking and Energy Technologies 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 Westpac Banking with a short position of Energy Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Energy Technologies.
Diversification Opportunities for Westpac Banking and Energy Technologies
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Westpac and Energy is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking Corp and Energy Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Technologies and Westpac Banking 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 Westpac Banking Corp are associated (or correlated) with Energy Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Technologies has no effect on the direction of Westpac Banking i.e., Westpac Banking and Energy Technologies go up and down completely randomly.
Pair Corralation between Westpac Banking and Energy Technologies
Assuming the 90 days trading horizon Westpac Banking Corp is expected to generate 0.45 times more return on investment than Energy Technologies. However, Westpac Banking Corp is 2.2 times less risky than Energy Technologies. It trades about 0.14 of its potential returns per unit of risk. Energy Technologies Limited is currently generating about -0.04 per unit of risk. If you would invest 1,966 in Westpac Banking Corp on August 28, 2024 and sell it today you would earn a total of 1,375 from holding Westpac Banking Corp or generate 69.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
Westpac Banking Corp vs. Energy Technologies Limited
Performance |
| Timeline |
| Westpac Banking Corp |
| Energy Technologies |
Westpac Banking and Energy Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Energy Technologies
The main advantage of trading using opposite Westpac Banking and Energy Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Energy Technologies 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 Energy Technologies will offset losses from the drop in Energy Technologies' long position.| Westpac Banking vs. Lendlease Group | Westpac Banking vs. Macquarie Bank Limited | Westpac Banking vs. Insignia Financial | Westpac Banking vs. Finexia Financial Group |
| Energy Technologies vs. Aneka Tambang Tbk | Energy Technologies vs. Macquarie Group | Energy Technologies vs. Macquarie Group Ltd | Energy Technologies vs. Challenger |
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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