Correlation Between Westpac Banking and Suncorp
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Suncorp 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 Suncorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Suncorp Group, you can compare the effects of market volatilities on Westpac Banking and Suncorp 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 Suncorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Suncorp.
Diversification Opportunities for Westpac Banking and Suncorp
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Westpac and Suncorp is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Suncorp Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suncorp 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 Suncorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suncorp Group has no effect on the direction of Westpac Banking i.e., Westpac Banking and Suncorp go up and down completely randomly.
Pair Corralation between Westpac Banking and Suncorp
Assuming the 90 days trading horizon Westpac Banking is expected to generate 13.59 times less return on investment than Suncorp. But when comparing it to its historical volatility, Westpac Banking is 3.8 times less risky than Suncorp. It trades about 0.11 of its potential returns per unit of risk. Suncorp Group is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 1,934 in Suncorp Group on November 3, 2024 and sell it today you would earn a total of 147.00 from holding Suncorp Group or generate 7.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. Suncorp Group
Performance |
| Timeline |
| Westpac Banking |
| Suncorp Group |
Westpac Banking and Suncorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and Suncorp
The main advantage of trading using opposite Westpac Banking and Suncorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Suncorp 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 Suncorp will offset losses from the drop in Suncorp's long position.| Westpac Banking vs. Sayona Mining | Westpac Banking vs. Macquarie Technology Group | Westpac Banking vs. Ambertech | Westpac Banking vs. Readytech Holdings |
| Suncorp vs. Hudson Investment Group | Suncorp vs. Sandon Capital Investments | Suncorp vs. The Environmental Group | Suncorp vs. K2 Asset Management |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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