Correlation Between Bravura Solutions and Westpac Banking

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

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

Diversification Opportunities for Bravura Solutions and Westpac Banking

-0.27

Correlation Coefficient

Bravura Solutions  Westpac Banking

Very good diversification

The 3 months correlation between Bravura and Westpac is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bravura Solutions and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Bravura Solutions 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 Bravura Solutions 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 Bravura Solutions i.e., Bravura Solutions and Westpac Banking go up and down completely randomly.

Pair Corralation between Bravura Solutions and Westpac Banking

Assuming the 90 days trading horizon Bravura Solutions is expected to generate 11.63 times more return on investment than Westpac Banking. However, Bravura Solutions is 11.63 times more volatile than Westpac Banking. It trades about 0.34 of its potential returns per unit of risk. Westpac Banking is currently generating about 0.05 per unit of risk. If you would invest  153.00  in Bravura Solutions on September 25, 2024 and sell it today you would earn a total of  64.00  from holding Bravura Solutions or generate 41.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Bravura Solutions  vs.  Westpac Banking

Bravura Solutions

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bravura Solutions are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bravura Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Westpac Banking

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Westpac Banking are ranked lower than 2 (%) 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.

Pair Trading with Bravura Solutions and Westpac Banking

The main advantage of trading using opposite Bravura Solutions and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bravura Solutions 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 Bravura Solutions and Westpac Banking 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.