Correlation Between SEVEN GROUP and Westpac Banking
Can any of the company-specific risk be diversified away by investing in both SEVEN GROUP 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 SEVEN GROUP and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SEVEN GROUP HOLDINGS and Westpac Banking, you can compare the effects of market volatilities on SEVEN GROUP 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 SEVEN GROUP with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEVEN GROUP and Westpac Banking.
Diversification Opportunities for SEVEN GROUP and Westpac Banking
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SEVEN and Westpac is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding SEVEN GROUP HOLDINGS and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and SEVEN GROUP 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 SEVEN GROUP HOLDINGS 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 SEVEN GROUP i.e., SEVEN GROUP and Westpac Banking go up and down completely randomly.
Pair Corralation between SEVEN GROUP and Westpac Banking
Assuming the 90 days trading horizon SEVEN GROUP HOLDINGS is expected to generate 5.77 times more return on investment than Westpac Banking. However, SEVEN GROUP is 5.77 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 0.09 per unit of risk. If you would invest 4,227 in SEVEN GROUP HOLDINGS on September 23, 2024 and sell it today you would earn a total of 264.00 from holding SEVEN GROUP HOLDINGS or generate 6.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
SEVEN GROUP HOLDINGS vs. Westpac Banking
Performance |
Timeline |
SEVEN GROUP HOLDINGS |
Westpac Banking |
SEVEN GROUP and Westpac Banking Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SEVEN GROUP and Westpac Banking
The main advantage of trading using opposite SEVEN GROUP and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEVEN GROUP 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.SEVEN GROUP vs. Westpac Banking | SEVEN GROUP vs. Ecofibre | SEVEN GROUP vs. iShares Global Healthcare | SEVEN GROUP vs. Australian Dairy Farms |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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