Correlation Between Westpac Banking and Talisman Mining
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Talisman Mining 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 Talisman Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Talisman Mining, you can compare the effects of market volatilities on Westpac Banking and Talisman Mining 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 Talisman Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Talisman Mining.
Diversification Opportunities for Westpac Banking and Talisman Mining
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Westpac and Talisman is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Talisman Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talisman Mining 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 Talisman Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talisman Mining has no effect on the direction of Westpac Banking i.e., Westpac Banking and Talisman Mining go up and down completely randomly.
Pair Corralation between Westpac Banking and Talisman Mining
Assuming the 90 days trading horizon Westpac Banking is expected to generate 11.84 times less return on investment than Talisman Mining. But when comparing it to its historical volatility, Westpac Banking is 15.03 times less risky than Talisman Mining. It trades about 0.06 of its potential returns per unit of risk. Talisman Mining is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14.00 in Talisman Mining on September 13, 2024 and sell it today you would earn a total of 10.00 from holding Talisman Mining or generate 71.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. Talisman Mining
Performance |
| Timeline |
| Westpac Banking |
| Talisman Mining |
Westpac Banking and Talisman Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Talisman Mining
The main advantage of trading using opposite Westpac Banking and Talisman Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Talisman Mining 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 Talisman Mining will offset losses from the drop in Talisman Mining's long position.| Westpac Banking vs. Premier Investments | Westpac Banking vs. REGAL ASIAN INVESTMENTS | Westpac Banking vs. MFF Capital Investments | Westpac Banking vs. Dexus Convenience Retail |
| Talisman Mining vs. Readytech Holdings | Talisman Mining vs. Bisalloy Steel Group | Talisman Mining vs. WiseTech Global Limited | Talisman Mining vs. Aurelia Metals |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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