Correlation Between WiseTech Global and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both WiseTech Global and Westpac Banking 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 WiseTech Global and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WiseTech Global Limited and Westpac Banking, you can compare the effects of market volatilities on WiseTech Global and Westpac Banking 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 WiseTech Global with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of WiseTech Global and Westpac Banking.
Diversification Opportunities for WiseTech Global and Westpac Banking
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between WiseTech and Westpac is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding WiseTech Global Limited and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and WiseTech Global 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 WiseTech Global Limited are associated (or correlated) with Westpac Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westpac Banking has no effect on the direction of WiseTech Global i.e., WiseTech Global and Westpac Banking go up and down completely randomly.
Pair Corralation between WiseTech Global and Westpac Banking
Assuming the 90 days trading horizon WiseTech Global Limited is expected to generate 8.77 times more return on investment than Westpac Banking. However, WiseTech Global is 8.77 times more volatile than Westpac Banking. It trades about 0.1 of its potential returns per unit of risk. Westpac Banking is currently generating about 0.06 per unit of risk. If you would invest 6,789 in WiseTech Global Limited on September 4, 2024 and sell it today you would earn a total of 5,988 from holding WiseTech Global Limited or generate 88.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WiseTech Global Limited vs. Westpac Banking
Performance |
| Timeline |
| WiseTech Global |
| Westpac Banking |
WiseTech Global and Westpac Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WiseTech Global and Westpac Banking
The main advantage of trading using opposite WiseTech Global and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WiseTech Global position performs unexpectedly, Westpac Banking 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 Westpac Banking will offset losses from the drop in Westpac Banking's long position.| WiseTech Global vs. Aneka Tambang Tbk | WiseTech Global vs. BHP Group Limited | WiseTech Global vs. Commonwealth Bank of | WiseTech Global vs. Commonwealth Bank of |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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