Correlation Between Data3 and Westpac Banking

Can any of the company-specific risk be diversified away by investing in both Data3 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 Data3 and Westpac Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Data3 and Westpac Banking, you can compare the effects of market volatilities on Data3 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 Data3 with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Data3 and Westpac Banking.

Diversification Opportunities for Data3 and Westpac Banking

-0.16

Correlation Coefficient

Data3  Westpac Banking

Good diversification

The 3 months correlation between Data3 and Westpac is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Data3 and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Data3 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 Data3 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 Data3 i.e., Data3 and Westpac Banking go up and down completely randomly.

Pair Corralation between Data3 and Westpac Banking

Assuming the 90 days trading horizon Data3 is expected to under-perform the Westpac Banking. In addition to that, Data3 is 6.34 times more volatile than Westpac Banking. It trades about -0.35 of its total potential returns per unit of risk. Westpac Banking is currently generating about 0.1 per unit of volatility. If you would invest  10,449  in Westpac Banking on September 23, 2024 and sell it today you would earn a total of  88.00  from holding Westpac Banking or generate 0.84% return on investment over 90 days.

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

Data3  vs.  Westpac Banking

Data3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data3 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 essential 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.

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 Data3 and Westpac Banking

The main advantage of trading using opposite Data3 and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Data3 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 Data3 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..