Correlation Between Aurelia Metals and Westpac Banking

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

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

Diversification Opportunities for Aurelia Metals and Westpac Banking

0.09

Correlation Coefficient

Aurelia Metals  Westpac Banking

Significant diversification

The 3 months correlation between Aurelia and Westpac is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Aurelia Metals and Westpac Banking Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking Corp and Aurelia Metals 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 Aurelia Metals 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 Corp has no effect on the direction of Aurelia Metals i.e., Aurelia Metals and Westpac Banking go up and down completely randomly.

Pair Corralation between Aurelia Metals and Westpac Banking

Assuming the 90 days trading horizon Aurelia Metals is expected to under-perform the Westpac Banking. In addition to that, Aurelia Metals is 18.25 times more volatile than Westpac Banking Corp. It trades about -0.05 of its total potential returns per unit of risk. Westpac Banking Corp is currently generating about -0.24 per unit of volatility. If you would invest  10,359  in Westpac Banking Corp on September 5, 2024 and sell it today you would lose (114.00) from holding Westpac Banking Corp or give up 1.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Aurelia Metals  vs.  Westpac Banking Corp

Aurelia Metals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Aurelia Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Westpac Banking Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Westpac Banking Corp are ranked lower than 1 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aurelia Metals and Westpac Banking

The main advantage of trading using opposite Aurelia Metals and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurelia Metals 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 Aurelia Metals and Westpac Banking Corp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.