Correlation Between Westpac Banking and Peninsula Energy
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Peninsula Energy 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 Peninsula Energy 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 Peninsula Energy, you can compare the effects of market volatilities on Westpac Banking and Peninsula Energy 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 Peninsula Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Peninsula Energy.
Diversification Opportunities for Westpac Banking and Peninsula Energy
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westpac and Peninsula is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking Corp and Peninsula Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peninsula Energy 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 Peninsula Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peninsula Energy has no effect on the direction of Westpac Banking i.e., Westpac Banking and Peninsula Energy go up and down completely randomly.
Pair Corralation between Westpac Banking and Peninsula Energy
Assuming the 90 days trading horizon Westpac Banking Corp is expected to generate 0.16 times more return on investment than Peninsula Energy. However, Westpac Banking Corp is 6.07 times less risky than Peninsula Energy. It trades about 0.13 of its potential returns per unit of risk. Peninsula Energy is currently generating about -0.01 per unit of risk. If you would invest 1,935 in Westpac Banking Corp on August 24, 2024 and sell it today you would earn a total of 1,448 from holding Westpac Banking Corp or generate 74.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking Corp vs. Peninsula Energy
Performance |
| Timeline |
| Westpac Banking Corp |
| Peninsula Energy |
Westpac Banking and Peninsula Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Peninsula Energy
The main advantage of trading using opposite Westpac Banking and Peninsula Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Peninsula Energy 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 Peninsula Energy will offset losses from the drop in Peninsula Energy's long position.| Westpac Banking vs. Ecofibre | Westpac Banking vs. iShares Global Healthcare | Westpac Banking vs. Ridley | Westpac Banking vs. Australian Dairy Farms |
| Peninsula Energy vs. Westpac Banking | Peninsula Energy vs. ABACUS STORAGE KING | Peninsula Energy vs. Odyssey Energy | Peninsula Energy 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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