Correlation Between Westpac Banking and FireFly Metals
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and FireFly Metals 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 FireFly Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and FireFly Metals, you can compare the effects of market volatilities on Westpac Banking and FireFly Metals 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 FireFly Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and FireFly Metals.
Diversification Opportunities for Westpac Banking and FireFly Metals
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Westpac and FireFly is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and FireFly Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FireFly Metals 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 FireFly Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FireFly Metals has no effect on the direction of Westpac Banking i.e., Westpac Banking and FireFly Metals go up and down completely randomly.
Pair Corralation between Westpac Banking and FireFly Metals
Assuming the 90 days trading horizon Westpac Banking is expected to generate 1.05 times less return on investment than FireFly Metals. But when comparing it to its historical volatility, Westpac Banking is 11.42 times less risky than FireFly Metals. It trades about 0.14 of its potential returns per unit of risk. FireFly Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 90.00 in FireFly Metals on October 30, 2024 and sell it today you would earn a total of 0.00 from holding FireFly Metals or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. FireFly Metals
Performance |
| Timeline |
| Westpac Banking |
| FireFly Metals |
Westpac Banking and FireFly Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and FireFly Metals
The main advantage of trading using opposite Westpac Banking and FireFly Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, FireFly Metals 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 FireFly Metals will offset losses from the drop in FireFly Metals' long position.| Westpac Banking vs. Magellan Financial Group | Westpac Banking vs. Falcon Metals | Westpac Banking vs. Stelar Metals | Westpac Banking vs. Insignia Financial |
| FireFly Metals vs. Spirit Telecom | FireFly Metals vs. Sky Metals | FireFly Metals vs. Hutchison Telecommunications | FireFly Metals vs. Farm Pride Foods |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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