Correlation Between Westpac Banking and Ampol
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Ampol 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 Ampol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Ampol, you can compare the effects of market volatilities on Westpac Banking and Ampol 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 Ampol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Ampol.
Diversification Opportunities for Westpac Banking and Ampol
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westpac and Ampol is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Ampol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ampol 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 Ampol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ampol has no effect on the direction of Westpac Banking i.e., Westpac Banking and Ampol go up and down completely randomly.
Pair Corralation between Westpac Banking and Ampol
Assuming the 90 days trading horizon Westpac Banking is expected to generate 6.11 times less return on investment than Ampol. But when comparing it to its historical volatility, Westpac Banking is 4.62 times less risky than Ampol. It trades about 0.11 of its potential returns per unit of risk. Ampol is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,820 in Ampol on August 31, 2024 and sell it today you would earn a total of 134.00 from holding Ampol or generate 4.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Westpac Banking vs. Ampol
Performance |
| Timeline |
| Westpac Banking |
| Ampol |
Westpac Banking and Ampol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Ampol
The main advantage of trading using opposite Westpac Banking and Ampol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Ampol 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 Ampol will offset losses from the drop in Ampol's long position.| Westpac Banking vs. Truscott Mining Corp | Westpac Banking vs. EMvision Medical Devices | Westpac Banking vs. Retail Food Group | Westpac Banking vs. Aeon Metals |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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