Correlation Between Garda Diversified and Westpac Banking

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

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

Diversification Opportunities for Garda Diversified and Westpac Banking

-0.63

Correlation Coefficient

Garda Diversified  Westpac Banking

Excellent diversification

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

Pair Corralation between Garda Diversified and Westpac Banking

Assuming the 90 days trading horizon Garda Diversified Ppty is expected to under-perform the Westpac Banking. In addition to that, Garda Diversified is 3.5 times more volatile than Westpac Banking. It trades about -0.05 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  10,488  in Westpac Banking on December 2, 2024 and sell it today you would earn a total of  197.00  from holding Westpac Banking or generate 1.88% return on investment over 90 days.

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

Garda Diversified Ppty  vs.  Westpac Banking

Garda Diversified Ppty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Garda Diversified Ppty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Garda Diversified 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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westpac Banking are ranked lower than 8 (%) 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 Garda Diversified and Westpac Banking

The main advantage of trading using opposite Garda Diversified and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garda Diversified 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 Garda Diversified Ppty 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.