Correlation Between Westpac Banking and Healthco Healthcare
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Healthco Healthcare 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 Healthco Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Healthco Healthcare and, you can compare the effects of market volatilities on Westpac Banking and Healthco Healthcare 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 Healthco Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Healthco Healthcare.
Diversification Opportunities for Westpac Banking and Healthco Healthcare
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westpac and Healthco is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Healthco Healthcare and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthco Healthcare and 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 Healthco Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthco Healthcare and has no effect on the direction of Westpac Banking i.e., Westpac Banking and Healthco Healthcare go up and down completely randomly.
Pair Corralation between Westpac Banking and Healthco Healthcare
Assuming the 90 days trading horizon Westpac Banking is expected to generate 0.27 times more return on investment than Healthco Healthcare. However, Westpac Banking is 3.64 times less risky than Healthco Healthcare. It trades about 0.01 of its potential returns per unit of risk. Healthco Healthcare and is currently generating about -0.05 per unit of risk. If you would invest 10,570 in Westpac Banking on August 29, 2024 and sell it today you would earn a total of 12.00 from holding Westpac Banking or generate 0.11% 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. Healthco Healthcare and
Performance |
| Timeline |
| Westpac Banking |
| Healthco Healthcare and |
Westpac Banking and Healthco Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Healthco Healthcare
The main advantage of trading using opposite Westpac Banking and Healthco Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Healthco Healthcare 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 Healthco Healthcare will offset losses from the drop in Healthco Healthcare's long position.| Westpac Banking vs. Champion Iron | Westpac Banking vs. Ridley | Westpac Banking vs. Australian Dairy Farms | Westpac Banking vs. Perpetual Credit Income |
| Healthco Healthcare vs. Australian Unity Office | Healthco Healthcare vs. Champion Iron | Healthco Healthcare vs. Ridley | Healthco Healthcare vs. Peel Mining |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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