Correlation Between Centuria Industrial and Westpac Banking

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

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

Diversification Opportunities for Centuria Industrial and Westpac Banking

0.63

Correlation Coefficient

Centuria Industrial  Westpac Banking

Poor diversification

The 3 months correlation between Centuria and Westpac is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Centuria Industrial Reit and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Centuria Industrial 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 Centuria Industrial Reit 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 Centuria Industrial i.e., Centuria Industrial and Westpac Banking go up and down completely randomly.

Pair Corralation between Centuria Industrial and Westpac Banking

Assuming the 90 days trading horizon Centuria Industrial Reit is expected to generate 5.15 times more return on investment than Westpac Banking. However, Centuria Industrial is 5.15 times more volatile than Westpac Banking. It trades about 0.05 of its potential returns per unit of risk. Westpac Banking is currently generating about 0.03 per unit of risk. If you would invest  281.00  in Centuria Industrial Reit on December 30, 2024 and sell it today you would earn a total of  9.00  from holding Centuria Industrial Reit or generate 3.2% return on investment over 90 days.

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

Centuria Industrial Reit  vs.  Westpac Banking

Centuria Industrial Reit

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Centuria Industrial Reit are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Centuria Industrial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Westpac Banking

Risk-Adjusted Performance

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 Centuria Industrial and Westpac Banking

The main advantage of trading using opposite Centuria Industrial and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centuria Industrial 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 Centuria Industrial Reit 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 CEOs Directory module to screen CEOs from public companies around the world.