Correlation Between Westpac Banking and TPG Telecom
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and TPG Telecom 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 TPG Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and TPG Telecom, you can compare the effects of market volatilities on Westpac Banking and TPG Telecom 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 TPG Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and TPG Telecom.
Diversification Opportunities for Westpac Banking and TPG Telecom
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Westpac and TPG is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and TPG Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG Telecom 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 TPG Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG Telecom has no effect on the direction of Westpac Banking i.e., Westpac Banking and TPG Telecom go up and down completely randomly.
Pair Corralation between Westpac Banking and TPG Telecom
Assuming the 90 days trading horizon Westpac Banking is expected to generate 0.22 times more return on investment than TPG Telecom. However, Westpac Banking is 4.56 times less risky than TPG Telecom. It trades about 0.11 of its potential returns per unit of risk. TPG Telecom is currently generating about -0.03 per unit of risk. If you would invest 9,781 in Westpac Banking on August 25, 2024 and sell it today you would earn a total of 799.00 from holding Westpac Banking or generate 8.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. TPG Telecom
Performance |
| Timeline |
| Westpac Banking |
| TPG Telecom |
Westpac Banking and TPG Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and TPG Telecom
The main advantage of trading using opposite Westpac Banking and TPG Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, TPG Telecom 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 TPG Telecom will offset losses from the drop in TPG Telecom's long position.| Westpac Banking vs. Infomedia | Westpac Banking vs. Pioneer Credit | Westpac Banking vs. Qbe Insurance Group | Westpac Banking vs. National Australia Bank |
| TPG Telecom vs. National Australia Bank | TPG Telecom vs. National Australia Bank | TPG Telecom vs. Westpac Banking | TPG Telecom 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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