Correlation Between Westpac Banking and Neurotech International
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Neurotech International 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 Neurotech International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Neurotech International, you can compare the effects of market volatilities on Westpac Banking and Neurotech International 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 Neurotech International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Neurotech International.
Diversification Opportunities for Westpac Banking and Neurotech International
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Westpac and Neurotech is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Neurotech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neurotech International 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 Neurotech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neurotech International has no effect on the direction of Westpac Banking i.e., Westpac Banking and Neurotech International go up and down completely randomly.
Pair Corralation between Westpac Banking and Neurotech International
Assuming the 90 days trading horizon Westpac Banking is expected to under-perform the Neurotech International. But the stock apears to be less risky and, when comparing its historical volatility, Westpac Banking is 14.38 times less risky than Neurotech International. The stock trades about -0.3 of its potential returns per unit of risk. The Neurotech International is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 5.00 in Neurotech International on August 28, 2024 and sell it today you would earn a total of 1.90 from holding Neurotech International or generate 38.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. Neurotech International
Performance |
| Timeline |
| Westpac Banking |
| Neurotech International |
Westpac Banking and Neurotech International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Neurotech International
The main advantage of trading using opposite Westpac Banking and Neurotech International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Neurotech International 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 Neurotech International will offset losses from the drop in Neurotech International's long position.| Westpac Banking vs. Origin Energy | Westpac Banking vs. Insurance Australia Group | Westpac Banking vs. Hotel Property Investments | Westpac Banking vs. Ecofibre |
| Neurotech International vs. FSA Group | Neurotech International vs. Tamawood | Neurotech International vs. Rea Group | Neurotech International vs. CSL |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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