Correlation Between Westpac Banking and ALS
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and ALS 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 ALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and ALS, you can compare the effects of market volatilities on Westpac Banking and ALS 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 ALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and ALS.
Diversification Opportunities for Westpac Banking and ALS
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westpac and ALS is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and ALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALS 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 ALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALS has no effect on the direction of Westpac Banking i.e., Westpac Banking and ALS go up and down completely randomly.
Pair Corralation between Westpac Banking and ALS
Assuming the 90 days trading horizon Westpac Banking is expected to generate 2.33 times less return on investment than ALS. But when comparing it to its historical volatility, Westpac Banking is 3.85 times less risky than ALS. It trades about 0.07 of its potential returns per unit of risk. ALS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,534 in ALS on August 29, 2024 and sell it today you would earn a total of 61.00 from holding ALS or generate 3.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. ALS
Performance |
| Timeline |
| Westpac Banking |
| ALS |
Westpac Banking and ALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and ALS
The main advantage of trading using opposite Westpac Banking and ALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, ALS 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 ALS will offset losses from the drop in ALS's long position.| Westpac Banking vs. Champion Iron | Westpac Banking vs. Ridley | Westpac Banking vs. Australian Dairy Farms | Westpac Banking vs. Perpetual Credit Income |
| ALS vs. MFF Capital Investments | ALS vs. Argo Investments | ALS vs. BlackWall Property Funds | ALS vs. A1 Investments Resources |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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