Correlation Between Westpac Banking and Tlou Energy
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Tlou 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 Tlou 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 Tlou Energy, you can compare the effects of market volatilities on Westpac Banking and Tlou 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 Tlou Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Tlou Energy.
Diversification Opportunities for Westpac Banking and Tlou Energy
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Westpac and Tlou is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking Corp and Tlou Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tlou 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 Tlou Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tlou Energy has no effect on the direction of Westpac Banking i.e., Westpac Banking and Tlou Energy go up and down completely randomly.
Pair Corralation between Westpac Banking and Tlou Energy
Assuming the 90 days trading horizon Westpac Banking Corp is expected to generate 0.26 times more return on investment than Tlou Energy. However, Westpac Banking Corp is 3.91 times less risky than Tlou Energy. It trades about 0.1 of its potential returns per unit of risk. Tlou Energy is currently generating about -0.01 per unit of risk. If you would invest 2,108 in Westpac Banking Corp on August 27, 2024 and sell it today you would earn a total of 1,275 from holding Westpac Banking Corp or generate 60.48% 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. Tlou Energy
Performance |
| Timeline |
| Westpac Banking Corp |
| Tlou Energy |
Westpac Banking and Tlou Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Tlou Energy
The main advantage of trading using opposite Westpac Banking and Tlou Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Tlou 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 Tlou Energy will offset losses from the drop in Tlou Energy's long position.| Westpac Banking vs. Legacy Iron Ore | Westpac Banking vs. Tombador Iron | Westpac Banking vs. Perseus Mining | Westpac Banking vs. Sky Metals |
| Tlou Energy vs. Westpac Banking | Tlou Energy vs. ABACUS STORAGE KING | Tlou Energy vs. Insurance Australia Group | Tlou Energy vs. Origin Energy |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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