Correlation Between Westpac Banking and Bluebet Holdings

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

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

Diversification Opportunities for Westpac Banking and Bluebet Holdings

0.46

Correlation Coefficient

Westpac Banking  Bluebet Holdings

Very weak diversification

The 3 months correlation between Westpac and Bluebet is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking Corp and Bluebet Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluebet Holdings and Westpac Banking 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 Westpac Banking Corp are associated (or correlated) with Bluebet Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluebet Holdings has no effect on the direction of Westpac Banking i.e., Westpac Banking and Bluebet Holdings go up and down completely randomly.

Pair Corralation between Westpac Banking and Bluebet Holdings

Assuming the 90 days trading horizon Westpac Banking Corp is expected to under-perform the Bluebet Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Westpac Banking Corp is 3.63 times less risky than Bluebet Holdings. The stock trades about -0.07 of its potential returns per unit of risk. The Bluebet Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Bluebet Holdings on December 21, 2024 and sell it today you would earn a total of  3.00  from holding Bluebet Holdings or generate 10.34% return on investment over 90 days.

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

Westpac Banking Corp  vs.  Bluebet Holdings

Westpac Banking Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westpac Banking Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Westpac Banking is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Bluebet Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bluebet Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bluebet Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westpac Banking and Bluebet Holdings

The main advantage of trading using opposite Westpac Banking and Bluebet Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westpac Banking position performs unexpectedly, Bluebet Holdings 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 Bluebet Holdings will offset losses from the drop in Bluebet Holdings' long position.

The idea behind Westpac Banking Corp and Bluebet Holdings 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.