Correlation Between Greentech Metals and Westpac Banking

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Can any of the company-specific risk be diversified away by investing in both Greentech 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 Greentech 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 Greentech Metals and Westpac Banking, you can compare the effects of market volatilities on Greentech 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 Greentech Metals with a short position of Westpac Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Greentech Metals and Westpac Banking.

Diversification Opportunities for Greentech Metals and Westpac Banking

-0.54
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Greentech and Westpac is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Greentech Metals and Westpac Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westpac Banking and Greentech 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 Greentech 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 has no effect on the direction of Greentech Metals i.e., Greentech Metals and Westpac Banking go up and down completely randomly.

Pair Corralation between Greentech Metals and Westpac Banking

Assuming the 90 days trading horizon Greentech Metals is expected to generate 7.79 times more return on investment than Westpac Banking. However, Greentech Metals is 7.79 times more volatile than Westpac Banking. It trades about 0.01 of its potential returns per unit of risk. Westpac Banking is currently generating about -0.07 per unit of risk. If you would invest  7.20  in Greentech Metals on October 20, 2024 and sell it today you would earn a total of  0.00  from holding Greentech Metals or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.0%
ValuesDaily Returns

Greentech Metals  vs.  Westpac Banking

 Performance 
       Timeline  
Greentech Metals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Greentech Metals 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 technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Westpac Banking 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Westpac Banking 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 newest stock price disturbance, may contribute to short-term losses for the investors.

Greentech Metals and Westpac Banking Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Greentech Metals and Westpac Banking

The main advantage of trading using opposite Greentech Metals and Westpac Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Greentech 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 Greentech Metals 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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