Correlation Between Westpac Banking and Environmental
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Environmental 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 Environmental 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 The Environmental Group, you can compare the effects of market volatilities on Westpac Banking and Environmental 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 Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Environmental.
Diversification Opportunities for Westpac Banking and Environmental
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westpac and Environmental is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking Corp and The Environmental Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Environmental 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 Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Environmental has no effect on the direction of Westpac Banking i.e., Westpac Banking and Environmental go up and down completely randomly.
Pair Corralation between Westpac Banking and Environmental
Assuming the 90 days trading horizon Westpac Banking Corp is expected to generate 0.04 times more return on investment than Environmental. However, Westpac Banking Corp is 25.01 times less risky than Environmental. It trades about 0.2 of its potential returns per unit of risk. The Environmental Group is currently generating about -0.26 per unit of risk. If you would invest 10,261 in Westpac Banking Corp on September 12, 2024 and sell it today you would earn a total of 79.00 from holding Westpac Banking Corp or generate 0.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Westpac Banking Corp vs. The Environmental Group
Performance |
| Timeline |
| Westpac Banking Corp |
| The Environmental |
Westpac Banking and Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Environmental
The main advantage of trading using opposite Westpac Banking and Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Environmental 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 Environmental will offset losses from the drop in Environmental's long position.| Westpac Banking vs. oOhMedia | Westpac Banking vs. Iron Road | Westpac Banking vs. Environmental Clean Technologies | Westpac Banking vs. Retail Food Group |
| Environmental vs. Pinnacle Investment Management | Environmental vs. Bank of Queensland | Environmental vs. Prime Financial Group | Environmental vs. Perpetual Credit Income |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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