Correlation Between Westpac Banking and Macquarie
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Macquarie 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 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 Group, you can compare the effects of market volatilities on Westpac Banking and Macquarie 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Macquarie.
Diversification Opportunities for Westpac Banking and Macquarie
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westpac and Macquarie is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Macquarie Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Group 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Group has no effect on the direction of Westpac Banking i.e., Westpac Banking and Macquarie go up and down completely randomly.
Pair Corralation between Westpac Banking and Macquarie
Assuming the 90 days trading horizon Westpac Banking is expected to generate 2.51 times less return on investment than Macquarie. But when comparing it to its historical volatility, Westpac Banking is 3.7 times less risky than Macquarie. It trades about 0.11 of its potential returns per unit of risk. Macquarie Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 15,625 in Macquarie Group on August 30, 2024 and sell it today you would earn a total of 7,541 from holding Macquarie Group or generate 48.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 47.29% |
| Values | Daily Returns |
Westpac Banking vs. Macquarie Group
Performance |
| Timeline |
| Westpac Banking |
| Macquarie Group |
Westpac Banking and Macquarie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Macquarie
The main advantage of trading using opposite Westpac Banking and Macquarie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Macquarie 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 will offset losses from the drop in Macquarie'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 vs. Hutchison Telecommunications | Macquarie vs. Iron Road | Macquarie vs. Kingsrose Mining | Macquarie vs. Andean Silver Limited |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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