Correlation Between Westpac Banking and Bendigo
Can any of the company-specific risk be diversified away by investing in both Westpac Banking and Bendigo 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 Bendigo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westpac Banking and Bendigo And Adelaide, you can compare the effects of market volatilities on Westpac Banking and Bendigo 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 Bendigo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westpac Banking and Bendigo.
Diversification Opportunities for Westpac Banking and Bendigo
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Westpac and Bendigo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Bendigo And Adelaide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bendigo And Adelaide 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 Bendigo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bendigo And Adelaide has no effect on the direction of Westpac Banking i.e., Westpac Banking and Bendigo go up and down completely randomly.
Pair Corralation between Westpac Banking and Bendigo
Assuming the 90 days trading horizon Westpac Banking is expected to generate 5.72 times less return on investment than Bendigo. But when comparing it to its historical volatility, Westpac Banking is 4.82 times less risky than Bendigo. It trades about 0.08 of its potential returns per unit of risk. Bendigo And Adelaide is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,195 in Bendigo And Adelaide on September 24, 2024 and sell it today you would earn a total of 82.00 from holding Bendigo And Adelaide or generate 6.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Westpac Banking vs. Bendigo And Adelaide
Performance |
Timeline |
Westpac Banking |
Bendigo And Adelaide |
Westpac Banking and Bendigo Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Westpac Banking and Bendigo
The main advantage of trading using opposite Westpac Banking and Bendigo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Bendigo 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 Bendigo will offset losses from the drop in Bendigo's long position.Westpac Banking vs. Thorney Technologies | Westpac Banking vs. Advanced Braking Technology | Westpac Banking vs. oOhMedia | Westpac Banking vs. Ainsworth Game Technology |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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