Correlation Between Westpac Banking and Macquarie Bank
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Macquarie Bank 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 Macquarie Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Macquarie Bank Limited, you can compare the effects of market volatilities on Westpac Banking and Macquarie Bank 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 Macquarie Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Macquarie Bank.
Diversification Opportunities for Westpac Banking and Macquarie Bank
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westpac and Macquarie is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Macquarie Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Bank 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 Macquarie Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Bank has no effect on the direction of Westpac Banking i.e., Westpac Banking and Macquarie Bank go up and down completely randomly.
Pair Corralation between Westpac Banking and Macquarie Bank
Assuming the 90 days trading horizon Westpac Banking is expected to generate 0.82 times more return on investment than Macquarie Bank. However, Westpac Banking is 1.22 times less risky than Macquarie Bank. It trades about 0.12 of its potential returns per unit of risk. Macquarie Bank Limited is currently generating about 0.09 per unit of risk. If you would invest 10,082 in Westpac Banking on August 30, 2024 and sell it today you would earn a total of 580.00 from holding Westpac Banking or generate 5.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. Macquarie Bank Limited
Performance |
| Timeline |
| Westpac Banking |
| Macquarie Bank |
Westpac Banking and Macquarie Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Macquarie Bank
The main advantage of trading using opposite Westpac Banking and Macquarie Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Macquarie Bank 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 Macquarie Bank will offset losses from the drop in Macquarie Bank's long position.| Westpac Banking vs. Hotel Property Investments | Westpac Banking vs. Alternative Investment Trust | Westpac Banking vs. BlackWall Property Funds | Westpac Banking vs. Clime Investment Management |
| Macquarie Bank vs. Ssr Mining | Macquarie Bank vs. Ora Banda Mining | Macquarie Bank vs. Black Cat Syndicate | Macquarie Bank 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |