Correlation Between Westpac Banking and ARN Media
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and ARN Media 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 ARN Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and ARN Media Limited, you can compare the effects of market volatilities on Westpac Banking and ARN Media 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 ARN Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and ARN Media.
Diversification Opportunities for Westpac Banking and ARN Media
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westpac and ARN is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and ARN Media Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARN Media Limited 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 ARN Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARN Media Limited has no effect on the direction of Westpac Banking i.e., Westpac Banking and ARN Media go up and down completely randomly.
Pair Corralation between Westpac Banking and ARN Media
Assuming the 90 days trading horizon Westpac Banking is expected to generate 0.1 times more return on investment than ARN Media. However, Westpac Banking is 10.51 times less risky than ARN Media. It trades about -0.04 of its potential returns per unit of risk. ARN Media Limited is currently generating about -0.02 per unit of risk. If you would invest 10,722 in Westpac Banking on September 1, 2024 and sell it today you would lose (31.00) from holding Westpac Banking or give up 0.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. ARN Media Limited
Performance |
| Timeline |
| Westpac Banking |
| ARN Media Limited |
Westpac Banking and ARN Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and ARN Media
The main advantage of trading using opposite Westpac Banking and ARN Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, ARN Media 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 ARN Media will offset losses from the drop in ARN Media's long position.| Westpac Banking vs. Ras Technology Holdings | Westpac Banking vs. Beston Global Food | Westpac Banking vs. Retail Food Group | Westpac Banking vs. TTG Fintech |
| ARN Media vs. Aneka Tambang Tbk | ARN Media vs. BHP Group Limited | ARN Media vs. Commonwealth Bank of | ARN Media vs. Commonwealth Bank of |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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