Correlation Between Bendigo and Westpac Banking

Can any of the company-specific risk be diversified away by investing in both Bendigo 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 Bendigo and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bendigo And Adelaide and Westpac Banking, you can compare the effects of market volatilities on Bendigo 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 Bendigo with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bendigo and Westpac Banking.

Diversification Opportunities for Bendigo and Westpac Banking

0.45

Correlation Coefficient

Bendigo  Westpac Banking

Very weak diversification

The 3 months correlation between Bendigo and Westpac is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bendigo And Adelaide and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Bendigo 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 Bendigo And Adelaide 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 Bendigo i.e., Bendigo and Westpac Banking go up and down completely randomly.

Pair Corralation between Bendigo and Westpac Banking

Assuming the 90 days trading horizon Bendigo And Adelaide is expected to generate 3.81 times more return on investment than Westpac Banking. However, Bendigo is 3.81 times more volatile than Westpac Banking. It trades about 0.08 of its potential returns per unit of risk. Westpac Banking is currently generating about 0.06 per unit of risk. If you would invest  846.00  in Bendigo And Adelaide on September 24, 2024 and sell it today you would earn a total of  431.00  from holding Bendigo And Adelaide or generate 50.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bendigo And Adelaide  vs.  Westpac Banking

Bendigo And Adelaide

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bendigo And Adelaide are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Bendigo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Westpac Banking

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westpac Banking are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Westpac Banking is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bendigo and Westpac Banking

The main advantage of trading using opposite Bendigo and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bendigo 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.

The idea behind Bendigo And Adelaide and Westpac Banking pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.