Correlation Between Westpac Banking and Sports Entertainment
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Sports Entertainment 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 Sports Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Sports Entertainment Group, you can compare the effects of market volatilities on Westpac Banking and Sports Entertainment 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 Sports Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Sports Entertainment.
Diversification Opportunities for Westpac Banking and Sports Entertainment
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Westpac and Sports is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Sports Entertainment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sports Entertainment 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 Sports Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sports Entertainment has no effect on the direction of Westpac Banking i.e., Westpac Banking and Sports Entertainment go up and down completely randomly.
Pair Corralation between Westpac Banking and Sports Entertainment
Assuming the 90 days trading horizon Westpac Banking is expected to generate 5.68 times less return on investment than Sports Entertainment. But when comparing it to its historical volatility, Westpac Banking is 16.72 times less risky than Sports Entertainment. It trades about 0.08 of its potential returns per unit of risk. Sports Entertainment Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 21.00 in Sports Entertainment Group on September 30, 2024 and sell it today you would earn a total of 1.00 from holding Sports Entertainment Group or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. Sports Entertainment Group
Performance |
| Timeline |
| Westpac Banking |
| Sports Entertainment |
Westpac Banking and Sports Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Sports Entertainment
The main advantage of trading using opposite Westpac Banking and Sports Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Sports Entertainment 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 Sports Entertainment will offset losses from the drop in Sports Entertainment's long position.| Westpac Banking vs. Aeon Metals | Westpac Banking vs. Energy Technologies Limited | Westpac Banking vs. ACDC Metals | Westpac Banking vs. Neurotech International |
| Sports Entertainment vs. FSA Group | Sports Entertainment vs. CSL | Sports Entertainment vs. Tamawood | Sports Entertainment vs. Cochlear |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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