Correlation Between Westpac Banking and AIC Mines

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

By analyzing existing cross correlation between Westpac Banking and AIC Mines Limited, you can compare the effects of market volatilities on Westpac Banking and AIC Mines 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 AIC Mines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and AIC Mines.

Diversification Opportunities for Westpac Banking and AIC Mines

-0.38

Correlation Coefficient

Westpac Banking  AIC Mines

Very good diversification

The 3 months correlation between Westpac and AIC is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and AIC Mines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIC Mines Limited 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 are associated (or correlated) with AIC Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIC Mines Limited has no effect on the direction of Westpac Banking i.e., Westpac Banking and AIC Mines go up and down completely randomly.

Pair Corralation between Westpac Banking and AIC Mines

Assuming the 90 days trading horizon Westpac Banking is expected to generate 0.06 times more return on investment than AIC Mines. However, Westpac Banking is 15.87 times less risky than AIC Mines. It trades about 0.06 of its potential returns per unit of risk. AIC Mines Limited is currently generating about -0.06 per unit of risk. If you would invest  10,282  in Westpac Banking on September 27, 2024 and sell it today you would earn a total of  93.00  from holding Westpac Banking or generate 0.9% return on investment over 90 days.

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

Westpac Banking  vs.  AIC Mines Limited

Westpac Banking

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Westpac Banking are ranked lower than 4 (%) 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.

AIC Mines Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIC Mines Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Westpac Banking and AIC Mines

The main advantage of trading using opposite Westpac Banking and AIC Mines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, AIC Mines 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 AIC Mines will offset losses from the drop in AIC Mines' long position.

The idea behind Westpac Banking and AIC Mines Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.