Correlation Between Westpac Banking and ANZ Group
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and ANZ Group 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 ANZ Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and ANZ Group Holdings, you can compare the effects of market volatilities on Westpac Banking and ANZ Group 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 ANZ Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and ANZ Group.
Diversification Opportunities for Westpac Banking and ANZ Group
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Westpac and ANZ is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and ANZ Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANZ Group Holdings 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 ANZ Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANZ Group Holdings has no effect on the direction of Westpac Banking i.e., Westpac Banking and ANZ Group go up and down completely randomly.
Pair Corralation between Westpac Banking and ANZ Group
Assuming the 90 days trading horizon Westpac Banking is expected to under-perform the ANZ Group. But the stock apears to be less risky and, when comparing its historical volatility, Westpac Banking is 1.06 times less risky than ANZ Group. The stock trades about -0.3 of its potential returns per unit of risk. The ANZ Group Holdings is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 10,420 in ANZ Group Holdings on August 29, 2024 and sell it today you would lose (40.00) from holding ANZ Group Holdings or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. ANZ Group Holdings
Performance |
| Timeline |
| Westpac Banking |
| ANZ Group Holdings |
Westpac Banking and ANZ Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and ANZ Group
The main advantage of trading using opposite Westpac Banking and ANZ Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, ANZ Group 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 ANZ Group will offset losses from the drop in ANZ Group's long position.| Westpac Banking vs. Origin Energy | Westpac Banking vs. Insurance Australia Group | Westpac Banking vs. Hotel Property Investments | Westpac Banking vs. Ecofibre |
| ANZ Group vs. Mystate | ANZ Group vs. Insurance Australia Group | ANZ Group vs. Origin Energy | ANZ Group vs. Ecofibre |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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