Correlation Between Westpac Banking and Hansen Technologies

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

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

Diversification Opportunities for Westpac Banking and Hansen Technologies

-0.41

Correlation Coefficient

Westpac Banking  Hansen Technologies

Very good diversification

The 3 months correlation between Westpac and Hansen is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Westpac Banking and Hansen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hansen Technologies 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 Hansen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hansen Technologies has no effect on the direction of Westpac Banking i.e., Westpac Banking and Hansen Technologies go up and down completely randomly.

Pair Corralation between Westpac Banking and Hansen Technologies

Assuming the 90 days trading horizon Westpac Banking is expected to generate 0.16 times more return on investment than Hansen Technologies. However, Westpac Banking is 6.43 times less risky than Hansen Technologies. It trades about 0.14 of its potential returns per unit of risk. Hansen Technologies is currently generating about -0.09 per unit of risk. If you would invest  10,413  in Westpac Banking on December 30, 2024 and sell it today you would earn a total of  211.00  from holding Westpac Banking or generate 2.03% 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.  Hansen Technologies

Westpac Banking

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westpac Banking are ranked lower than 11 (%) 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.

Hansen Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hansen Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Westpac Banking and Hansen Technologies

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

The idea behind Westpac Banking and Hansen Technologies 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.