Correlation Between Commerzbank and Sydbank
Can any of the company-specific risk be diversified away by investing in both Commerzbank and Sydbank 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 Commerzbank and Sydbank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commerzbank AG and Sydbank, you can compare the effects of market volatilities on Commerzbank and Sydbank 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 Commerzbank with a short position of Sydbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commerzbank and Sydbank.
Diversification Opportunities for Commerzbank and Sydbank
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Commerzbank and Sydbank is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Commerzbank AG and Sydbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sydbank and Commerzbank 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 Commerzbank AG are associated (or correlated) with Sydbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sydbank has no effect on the direction of Commerzbank i.e., Commerzbank and Sydbank go up and down completely randomly.
Pair Corralation between Commerzbank and Sydbank
Assuming the 90 days trading horizon Commerzbank AG is expected to generate 1.61 times more return on investment than Sydbank. However, Commerzbank is 1.61 times more volatile than Sydbank. It trades about 0.38 of its potential returns per unit of risk. Sydbank is currently generating about 0.25 per unit of risk. If you would invest 1,868 in Commerzbank AG on December 10, 2024 and sell it today you would earn a total of 440.00 from holding Commerzbank AG or generate 23.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commerzbank AG vs. Sydbank
Performance |
| Timeline |
| Commerzbank AG |
| Sydbank |
Commerzbank and Sydbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commerzbank and Sydbank
The main advantage of trading using opposite Commerzbank and Sydbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commerzbank position performs unexpectedly, Sydbank 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 Sydbank will offset losses from the drop in Sydbank's long position.| Commerzbank vs. EJF Investments | ||
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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