Correlation Between Westpac Banking and Whitehaven Coal
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Whitehaven Coal 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 Whitehaven Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Whitehaven Coal, you can compare the effects of market volatilities on Westpac Banking and Whitehaven Coal 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 Whitehaven Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Whitehaven Coal.
Diversification Opportunities for Westpac Banking and Whitehaven Coal
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Westpac and Whitehaven is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Whitehaven Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Westpac Banking i.e., Westpac Banking and Whitehaven Coal go up and down completely randomly.
Pair Corralation between Westpac Banking and Whitehaven Coal
Assuming the 90 days trading horizon Westpac Banking is expected to generate 0.12 times more return on investment than Whitehaven Coal. However, Westpac Banking is 8.05 times less risky than Whitehaven Coal. It trades about 0.06 of its potential returns per unit of risk. Whitehaven Coal is currently generating about -0.01 per unit of risk. If you would invest 9,530 in Westpac Banking on September 4, 2024 and sell it today you would earn a total of 933.00 from holding Westpac Banking or generate 9.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. Whitehaven Coal
Performance |
| Timeline |
| Westpac Banking |
| Whitehaven Coal |
Westpac Banking and Whitehaven Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Whitehaven Coal
The main advantage of trading using opposite Westpac Banking and Whitehaven Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Whitehaven Coal 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 Whitehaven Coal will offset losses from the drop in Whitehaven Coal's long position.| Westpac Banking vs. Neurotech International | Westpac Banking vs. WiseTech Global Limited | Westpac Banking vs. Bio Gene Technology | Westpac Banking vs. Ainsworth Game Technology |
| Whitehaven Coal vs. Westpac Banking | Whitehaven Coal vs. ABACUS STORAGE KING | Whitehaven Coal vs. Odyssey Energy | Whitehaven Coal vs. Summit Resources Limited |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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