Correlation Between Westpac Banking and Cochlear
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Cochlear 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 Cochlear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Cochlear, you can compare the effects of market volatilities on Westpac Banking and Cochlear 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 Cochlear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Cochlear.
Diversification Opportunities for Westpac Banking and Cochlear
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westpac and Cochlear is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Cochlear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cochlear 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 Cochlear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cochlear has no effect on the direction of Westpac Banking i.e., Westpac Banking and Cochlear go up and down completely randomly.
Pair Corralation between Westpac Banking and Cochlear
Assuming the 90 days trading horizon Westpac Banking is expected to generate 1.98 times less return on investment than Cochlear. But when comparing it to its historical volatility, Westpac Banking is 4.25 times less risky than Cochlear. It trades about 0.11 of its potential returns per unit of risk. Cochlear is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 23,298 in Cochlear on August 24, 2024 and sell it today you would earn a total of 6,525 from holding Cochlear or generate 28.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 55.5% |
| Values | Daily Returns |
Westpac Banking vs. Cochlear
Performance |
| Timeline |
| Westpac Banking |
| Cochlear |
Westpac Banking and Cochlear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Cochlear
The main advantage of trading using opposite Westpac Banking and Cochlear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Cochlear 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 Cochlear will offset losses from the drop in Cochlear's long position.| Westpac Banking vs. Ecofibre | Westpac Banking vs. iShares Global Healthcare | Westpac Banking vs. Ridley | Westpac Banking vs. Australian Dairy Farms |
| Cochlear vs. Thorney Technologies | Cochlear vs. Sky Metals | Cochlear vs. DY6 Metals | Cochlear vs. Srj Technologies Group |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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