Correlation Between Westpac Banking and Itech Minerals

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

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

Diversification Opportunities for Westpac Banking and Itech Minerals

-0.58

Correlation Coefficient

Westpac Banking  Itech Minerals

Excellent diversification

The 3 months correlation between Westpac and Itech is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Itech Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itech Minerals 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 Itech Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itech Minerals has no effect on the direction of Westpac Banking i.e., Westpac Banking and Itech Minerals go up and down completely randomly.

Pair Corralation between Westpac Banking and Itech Minerals

Assuming the 90 days trading horizon Westpac Banking is expected to under-perform the Itech Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Westpac Banking is 19.23 times less risky than Itech Minerals. The stock trades about -0.02 of its potential returns per unit of risk. The Itech Minerals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Itech Minerals on October 23, 2024 and sell it today you would earn a total of  0.70  from holding Itech Minerals or generate 14.0% return on investment over 90 days.

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

Westpac Banking  vs.  Itech Minerals

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.

Itech Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itech Minerals 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 primary 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.

Pair Trading with Westpac Banking and Itech Minerals

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

The idea behind Westpac Banking and Itech Minerals 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.