Correlation Between Westpac Banking and Pinnacle Investment
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Pinnacle Investment 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 Pinnacle Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Pinnacle Investment Management, you can compare the effects of market volatilities on Westpac Banking and Pinnacle Investment 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 Pinnacle Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Pinnacle Investment.
Diversification Opportunities for Westpac Banking and Pinnacle Investment
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westpac and Pinnacle is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Pinnacle Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Investment 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 Pinnacle Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Investment has no effect on the direction of Westpac Banking i.e., Westpac Banking and Pinnacle Investment go up and down completely randomly.
Pair Corralation between Westpac Banking and Pinnacle Investment
Assuming the 90 days trading horizon Westpac Banking is expected to under-perform the Pinnacle Investment. But the stock apears to be less risky and, when comparing its historical volatility, Westpac Banking is 4.75 times less risky than Pinnacle Investment. The stock trades about -0.19 of its potential returns per unit of risk. The Pinnacle Investment Management is currently generating about 0.61 of returns per unit of risk over similar time horizon. If you would invest 1,842 in Pinnacle Investment Management on August 25, 2024 and sell it today you would earn a total of 488.00 from holding Pinnacle Investment Management or generate 26.49% 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. Pinnacle Investment Management
Performance |
| Timeline |
| Westpac Banking |
| Pinnacle Investment |
Westpac Banking and Pinnacle Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Pinnacle Investment
The main advantage of trading using opposite Westpac Banking and Pinnacle Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Pinnacle Investment 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 Pinnacle Investment will offset losses from the drop in Pinnacle Investment's long position.| Westpac Banking vs. Infomedia | Westpac Banking vs. Pioneer Credit | Westpac Banking vs. Qbe Insurance Group | Westpac Banking vs. National Australia Bank |
| Pinnacle Investment vs. National Australia Bank | Pinnacle Investment vs. National Australia Bank | Pinnacle Investment vs. Westpac Banking | Pinnacle Investment vs. National Australia Bank |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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