Correlation Between Westpac Banking and Ultra Clean
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Ultra Clean 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 Ultra Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Ultra Clean Holdings, you can compare the effects of market volatilities on Westpac Banking and Ultra Clean 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 Ultra Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Ultra Clean.
Diversification Opportunities for Westpac Banking and Ultra Clean
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westpac and Ultra is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Ultra Clean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Clean Holdings 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 are associated (or correlated) with Ultra Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Clean Holdings has no effect on the direction of Westpac Banking i.e., Westpac Banking and Ultra Clean go up and down completely randomly.
Pair Corralation between Westpac Banking and Ultra Clean
Assuming the 90 days horizon Westpac Banking is expected to generate 0.35 times more return on investment than Ultra Clean. However, Westpac Banking is 2.85 times less risky than Ultra Clean. It trades about 0.1 of its potential returns per unit of risk. Ultra Clean Holdings is currently generating about -0.1 per unit of risk. If you would invest 1,826 in Westpac Banking on September 3, 2024 and sell it today you would earn a total of 174.00 from holding Westpac Banking or generate 9.53% 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 vs. Ultra Clean Holdings
Performance |
| Timeline |
| Westpac Banking |
| Ultra Clean Holdings |
Westpac Banking and Ultra Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Ultra Clean
The main advantage of trading using opposite Westpac Banking and Ultra Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Ultra Clean 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 Ultra Clean will offset losses from the drop in Ultra Clean's long position.| Westpac Banking vs. Ultra Clean Holdings | Westpac Banking vs. TYSON FOODS A | Westpac Banking vs. CVW CLEANTECH INC | Westpac Banking vs. IMAGIN MEDICAL INC |
| Ultra Clean vs. ASML HOLDING NY | Ultra Clean vs. ASML Holding NV | Ultra Clean vs. ASML Holding NV | Ultra Clean vs. Applied Materials |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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