Correlation Between Westpac Banking and Homeco Daily
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Homeco Daily 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 Homeco Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Homeco Daily Needs, you can compare the effects of market volatilities on Westpac Banking and Homeco Daily 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 Homeco Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Homeco Daily.
Diversification Opportunities for Westpac Banking and Homeco Daily
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Westpac and Homeco is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Homeco Daily Needs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homeco Daily Needs 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 Homeco Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homeco Daily Needs has no effect on the direction of Westpac Banking i.e., Westpac Banking and Homeco Daily go up and down completely randomly.
Pair Corralation between Westpac Banking and Homeco Daily
Assuming the 90 days trading horizon Westpac Banking is expected to generate 1.03 times less return on investment than Homeco Daily. But when comparing it to its historical volatility, Westpac Banking is 4.09 times less risky than Homeco Daily. It trades about 0.1 of its potential returns per unit of risk. Homeco Daily Needs is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 118.00 in Homeco Daily Needs on August 27, 2024 and sell it today you would earn a total of 6.00 from holding Homeco Daily Needs or generate 5.08% 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. Homeco Daily Needs
Performance |
| Timeline |
| Westpac Banking |
| Homeco Daily Needs |
Westpac Banking and Homeco Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Homeco Daily
The main advantage of trading using opposite Westpac Banking and Homeco Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Homeco Daily 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 Homeco Daily will offset losses from the drop in Homeco Daily's long position.| Westpac Banking vs. Origin Energy | Westpac Banking vs. Insurance Australia Group | Westpac Banking vs. Hotel Property Investments | Westpac Banking vs. Ecofibre |
| Homeco Daily vs. Cromwell Property Group | Homeco Daily vs. GDI Property Group | Homeco Daily vs. Australian Unity Office |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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