Correlation Between Westpac Banking and De Grey

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

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

Diversification Opportunities for Westpac Banking and De Grey

0.47

Correlation Coefficient

Westpac Banking  De Grey

Very weak diversification

The 3 months correlation between Westpac and DEG is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and De Grey Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Grey Mining 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 De Grey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Grey Mining has no effect on the direction of Westpac Banking i.e., Westpac Banking and De Grey go up and down completely randomly.

Pair Corralation between Westpac Banking and De Grey

Assuming the 90 days trading horizon Westpac Banking is expected to under-perform the De Grey. But the stock apears to be less risky and, when comparing its historical volatility, Westpac Banking is 23.77 times less risky than De Grey. The stock trades about -0.06 of its potential returns per unit of risk. The De Grey Mining is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  134.00  in De Grey Mining on September 15, 2024 and sell it today you would earn a total of  56.00  from holding De Grey Mining or generate 41.79% return on investment over 90 days.

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

Westpac Banking  vs.  De Grey Mining

Westpac Banking

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Westpac Banking are ranked lower than 3 (%) 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.

De Grey Mining

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, De Grey unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westpac Banking and De Grey

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

The idea behind Westpac Banking and De Grey Mining 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.