Correlation Between Westpac Banking and Premier Investments
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Premier Investments 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 Premier Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Premier Investments, you can compare the effects of market volatilities on Westpac Banking and Premier Investments 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 Premier Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Premier Investments.
Diversification Opportunities for Westpac Banking and Premier Investments
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Westpac and Premier is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Premier Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Investments 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 Premier Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Investments has no effect on the direction of Westpac Banking i.e., Westpac Banking and Premier Investments go up and down completely randomly.
Pair Corralation between Westpac Banking and Premier Investments
Assuming the 90 days trading horizon Westpac Banking is expected to under-perform the Premier Investments. But the preferred stock apears to be less risky and, when comparing its historical volatility, Westpac Banking is 3.66 times less risky than Premier Investments. The preferred stock trades about -0.11 of its potential returns per unit of risk. The Premier Investments is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,297 in Premier Investments on September 14, 2024 and sell it today you would earn a total of 120.00 from holding Premier Investments or generate 3.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Westpac Banking vs. Premier Investments
Performance |
| Timeline |
| Westpac Banking |
| Premier Investments |
Westpac Banking and Premier Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Premier Investments
The main advantage of trading using opposite Westpac Banking and Premier Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Premier Investments 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 Premier Investments will offset losses from the drop in Premier Investments' long position.| Westpac Banking vs. Pointsbet Holdings | Westpac Banking vs. De Grey Mining | Westpac Banking vs. Telix Pharmaceuticals | Westpac Banking vs. Sims |
| Premier Investments vs. Hutchison Telecommunications | Premier Investments vs. Energy Resources | Premier Investments vs. GO2 People | Premier Investments vs. Pact Group Holdings |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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