Correlation Between Westpac Banking and EQ Resources
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and EQ Resources 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 EQ Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and EQ Resources, you can compare the effects of market volatilities on Westpac Banking and EQ Resources 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 EQ Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and EQ Resources.
Diversification Opportunities for Westpac Banking and EQ Resources
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Westpac and EQR is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and EQ Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQ Resources 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 EQ Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQ Resources has no effect on the direction of Westpac Banking i.e., Westpac Banking and EQ Resources go up and down completely randomly.
Pair Corralation between Westpac Banking and EQ Resources
Assuming the 90 days trading horizon Westpac Banking is expected to generate 15.52 times less return on investment than EQ Resources. But when comparing it to its historical volatility, Westpac Banking is 23.15 times less risky than EQ Resources. It trades about 0.04 of its potential returns per unit of risk. EQ Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5.10 in EQ Resources on August 30, 2024 and sell it today you would earn a total of 0.00 from holding EQ Resources or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. EQ Resources
Performance |
| Timeline |
| Westpac Banking |
| EQ Resources |
Westpac Banking and EQ Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and EQ Resources
The main advantage of trading using opposite Westpac Banking and EQ Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, EQ Resources 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 EQ Resources will offset losses from the drop in EQ Resources' long position.| Westpac Banking vs. REGAL ASIAN INVESTMENTS | Westpac Banking vs. Alternative Investment Trust | Westpac Banking vs. Pinnacle Investment Management | Westpac Banking vs. Argo Investments |
| EQ Resources vs. Queste Communications | EQ Resources vs. Kkr Credit Income | EQ Resources vs. Auswide Bank | EQ Resources vs. Janison Education Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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