Correlation Between Westpac Banking and ANZ Group

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Can any of the company-specific risk be diversified away by investing in both Westpac Banking and ANZ Group 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 ANZ Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking Corp and ANZ Group Holdings, you can compare the effects of market volatilities on Westpac Banking and ANZ Group 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 ANZ Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and ANZ Group.

Diversification Opportunities for Westpac Banking and ANZ Group

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Westpac and ANZ is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking Corp and ANZ Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANZ Group Holdings 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 Corp are associated (or correlated) with ANZ Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANZ Group Holdings has no effect on the direction of Westpac Banking i.e., Westpac Banking and ANZ Group go up and down completely randomly.

Pair Corralation between Westpac Banking and ANZ Group

Assuming the 90 days trading horizon Westpac Banking Corp is expected to generate 4.65 times more return on investment than ANZ Group. However, Westpac Banking is 4.65 times more volatile than ANZ Group Holdings. It trades about 0.13 of its potential returns per unit of risk. ANZ Group Holdings is currently generating about 0.1 per unit of risk. If you would invest  3,084  in Westpac Banking Corp on September 5, 2024 and sell it today you would earn a total of  277.00  from holding Westpac Banking Corp or generate 8.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Westpac Banking Corp  vs.  ANZ Group Holdings

 Performance 
       Timeline  
Westpac Banking Corp 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Westpac Banking Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Westpac Banking may actually be approaching a critical reversion point that can send shares even higher in January 2025.
ANZ Group Holdings 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ANZ Group Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ANZ Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Westpac Banking and ANZ Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Westpac Banking and ANZ Group

The main advantage of trading using opposite Westpac Banking and ANZ Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, ANZ Group 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 ANZ Group will offset losses from the drop in ANZ Group's long position.
The idea behind Westpac Banking Corp and ANZ Group Holdings 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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