Correlation Between Westpac Banking and SportsHero
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and SportsHero 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 SportsHero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and SportsHero, you can compare the effects of market volatilities on Westpac Banking and SportsHero 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 SportsHero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and SportsHero.
Diversification Opportunities for Westpac Banking and SportsHero
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westpac and SportsHero is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and SportsHero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SportsHero 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 SportsHero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SportsHero has no effect on the direction of Westpac Banking i.e., Westpac Banking and SportsHero go up and down completely randomly.
Pair Corralation between Westpac Banking and SportsHero
Assuming the 90 days trading horizon Westpac Banking is expected to under-perform the SportsHero. But the preferred stock apears to be less risky and, when comparing its historical volatility, Westpac Banking is 12.19 times less risky than SportsHero. The preferred stock trades about 0.0 of its potential returns per unit of risk. The SportsHero is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1.40 in SportsHero on September 2, 2024 and sell it today you would earn a total of 0.60 from holding SportsHero or generate 42.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. SportsHero
Performance |
| Timeline |
| Westpac Banking |
| SportsHero |
Westpac Banking and SportsHero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and SportsHero
The main advantage of trading using opposite Westpac Banking and SportsHero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, SportsHero 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 SportsHero will offset losses from the drop in SportsHero's long position.| Westpac Banking vs. Imricor Medical Systems | Westpac Banking vs. Midway | Westpac Banking vs. Betmakers Technology Group | Westpac Banking vs. SportsHero |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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