Correlation Between Westpac Banking and Talisman Mining

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

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

Diversification Opportunities for Westpac Banking and Talisman Mining

-0.45

Correlation Coefficient

Westpac Banking  Talisman Mining

Very good diversification

The 3 months correlation between Westpac and Talisman is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Talisman Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talisman 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 Talisman Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talisman Mining has no effect on the direction of Westpac Banking i.e., Westpac Banking and Talisman Mining go up and down completely randomly.

Pair Corralation between Westpac Banking and Talisman Mining

Assuming the 90 days trading horizon Westpac Banking is expected to under-perform the Talisman Mining. But the stock apears to be less risky and, when comparing its historical volatility, Westpac Banking is 14.62 times less risky than Talisman Mining. The stock trades about -0.07 of its potential returns per unit of risk. The Talisman Mining is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Talisman Mining on October 20, 2024 and sell it today you would earn a total of  0.00  from holding Talisman Mining or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Westpac Banking  vs.  Talisman Mining

Westpac Banking

Risk-Adjusted Performance

1 of 100

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.

Talisman Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talisman Mining 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 Talisman Mining

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

The idea behind Westpac Banking and Talisman 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.