Correlation Between Westpac Banking and Regal Investment
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Regal Investment 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 Regal Investment 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 Regal Investment, you can compare the effects of market volatilities on Westpac Banking and Regal Investment 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 Regal Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Regal Investment.
Diversification Opportunities for Westpac Banking and Regal Investment
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Westpac and Regal is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking Corp and Regal Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regal Investment 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 Regal Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regal Investment has no effect on the direction of Westpac Banking i.e., Westpac Banking and Regal Investment go up and down completely randomly.
Pair Corralation between Westpac Banking and Regal Investment
Assuming the 90 days trading horizon Westpac Banking Corp is expected to generate 0.78 times more return on investment than Regal Investment. However, Westpac Banking Corp is 1.28 times less risky than Regal Investment. It trades about 0.09 of its potential returns per unit of risk. Regal Investment is currently generating about 0.05 per unit of risk. If you would invest 2,092 in Westpac Banking Corp on September 3, 2024 and sell it today you would earn a total of 1,244 from holding Westpac Banking Corp or generate 59.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking Corp vs. Regal Investment
Performance |
| Timeline |
| Westpac Banking Corp |
| Regal Investment |
Westpac Banking and Regal Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Regal Investment
The main advantage of trading using opposite Westpac Banking and Regal Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Regal Investment 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 Regal Investment will offset losses from the drop in Regal Investment's long position.| Westpac Banking vs. Regal Investment | Westpac Banking vs. Computershare | Westpac Banking vs. Ainsworth Game Technology | Westpac Banking vs. REGAL ASIAN INVESTMENTS |
| Regal Investment vs. ABACUS STORAGE KING | Regal Investment vs. Champion Iron | Regal Investment vs. iShares Global Healthcare | Regal Investment vs. Peel Mining |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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