Correlation Between Capitol Health and Westpac Banking

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

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

Diversification Opportunities for Capitol Health and Westpac Banking

0.0

Correlation Coefficient

Capitol Health  Westpac Banking

Pay attention - limited upside

The 3 months correlation between Capitol and Westpac is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Capitol Health and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Capitol Health 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 Capitol Health 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 Capitol Health i.e., Capitol Health and Westpac Banking go up and down completely randomly.

Pair Corralation between Capitol Health and Westpac Banking

If you would invest  32.00  in Capitol Health on September 3, 2024 and sell it today you would earn a total of  5.00  from holding Capitol Health or generate 15.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Capitol Health  vs.  Westpac Banking

Capitol Health

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capitol Health are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking indicators, Capitol Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Westpac Banking

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westpac Banking has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Capitol Health and Westpac Banking

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

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.