Correlation Between Westpac Banking and X2M Connect
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and X2M Connect 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 X2M Connect into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and X2M Connect, you can compare the effects of market volatilities on Westpac Banking and X2M Connect 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 X2M Connect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and X2M Connect.
Diversification Opportunities for Westpac Banking and X2M Connect
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Westpac and X2M is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and X2M Connect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X2M Connect 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 X2M Connect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X2M Connect has no effect on the direction of Westpac Banking i.e., Westpac Banking and X2M Connect go up and down completely randomly.
Pair Corralation between Westpac Banking and X2M Connect
Assuming the 90 days trading horizon Westpac Banking is expected to generate 0.38 times more return on investment than X2M Connect. However, Westpac Banking is 2.62 times less risky than X2M Connect. It trades about -0.32 of its potential returns per unit of risk. X2M Connect is currently generating about -0.22 per unit of risk. If you would invest 10,760 in Westpac Banking on August 27, 2024 and sell it today you would lose (180.00) from holding Westpac Banking or give up 1.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westpac Banking vs. X2M Connect
Performance |
| Timeline |
| Westpac Banking |
| X2M Connect |
Westpac Banking and X2M Connect Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westpac Banking and X2M Connect
The main advantage of trading using opposite Westpac Banking and X2M Connect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, X2M Connect 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 X2M Connect will offset losses from the drop in X2M Connect's long position.| Westpac Banking vs. Origin Energy | Westpac Banking vs. Insurance Australia Group | Westpac Banking vs. Hotel Property Investments | Westpac Banking vs. Ecofibre |
| X2M Connect vs. Australian United Investment | X2M Connect vs. Alternative Investment Trust | X2M Connect vs. Argo Investments | X2M Connect vs. REGAL ASIAN INVESTMENTS |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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