Correlation Between Westpac Banking and Insignia Financial

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

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

Diversification Opportunities for Westpac Banking and Insignia Financial

0.0

Correlation Coefficient

Westpac Banking  Insignia Financial

Pay attention - limited upside

The 3 months correlation between Westpac and Insignia is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Insignia Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insignia Financial 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 are associated (or correlated) with Insignia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insignia Financial has no effect on the direction of Westpac Banking i.e., Westpac Banking and Insignia Financial go up and down completely randomly.

Pair Corralation between Westpac Banking and Insignia Financial

If you would invest  359.00  in Insignia Financial on December 29, 2024 and sell it today you would earn a total of  73.00  from holding Insignia Financial or generate 20.33% return on investment over 90 days.

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

Westpac Banking  vs.  Insignia Financial

Westpac Banking

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westpac Banking has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Insignia Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Insignia Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Insignia Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westpac Banking and Insignia Financial

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

The idea behind Westpac Banking and Insignia Financial 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.