Correlation Between Westpac Banking and Brookside Energy
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Brookside 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 Brookside Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Brookside Energy, you can compare the effects of market volatilities on Westpac Banking and Brookside 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 Brookside Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Brookside Energy.
Diversification Opportunities for Westpac Banking and Brookside Energy
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westpac and Brookside is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Brookside Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookside 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 are associated (or correlated) with Brookside Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookside Energy has no effect on the direction of Westpac Banking i.e., Westpac Banking and Brookside Energy go up and down completely randomly.
Pair Corralation between Westpac Banking and Brookside Energy
Assuming the 90 days trading horizon Westpac Banking is expected to generate 3.46 times less return on investment than Brookside Energy. But when comparing it to its historical volatility, Westpac Banking is 16.99 times less risky than Brookside Energy. It trades about 0.06 of its potential returns per unit of risk. Brookside Energy is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 70.00 in Brookside Energy on October 15, 2024 and sell it today you would lose (20.00) from holding Brookside Energy or give up 28.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. Brookside Energy
Performance |
| Timeline |
| Westpac Banking |
| Brookside Energy |
Westpac Banking and Brookside Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Brookside Energy
The main advantage of trading using opposite Westpac Banking and Brookside Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Brookside 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 Brookside Energy will offset losses from the drop in Brookside Energy's long position.| Westpac Banking vs. Farm Pride Foods | Westpac Banking vs. Qbe Insurance Group | Westpac Banking vs. MotorCycle Holdings | Westpac Banking vs. Premier Investments |
| Brookside Energy vs. Sandon Capital Investments | Brookside Energy vs. Retail Food Group | Brookside Energy vs. Alternative Investment Trust | Brookside Energy vs. Clime Investment Management |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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