Correlation Between Commonwealth Bank and 8Common
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and 8Common 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 Commonwealth Bank and 8Common into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and 8Common, you can compare the effects of market volatilities on Commonwealth Bank and 8Common 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 Commonwealth Bank with a short position of 8Common. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and 8Common.
Diversification Opportunities for Commonwealth Bank and 8Common
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Commonwealth and 8Common is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and 8Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 8Common and Commonwealth Bank 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 Commonwealth Bank are associated (or correlated) with 8Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 8Common has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and 8Common go up and down completely randomly.
Pair Corralation between Commonwealth Bank and 8Common
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 0.16 times more return on investment than 8Common. However, Commonwealth Bank is 6.11 times less risky than 8Common. It trades about 0.53 of its potential returns per unit of risk. 8Common is currently generating about -0.02 per unit of risk. If you would invest 14,286 in Commonwealth Bank on August 27, 2024 and sell it today you would earn a total of 1,617 from holding Commonwealth Bank or generate 11.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. 8Common
Performance |
| Timeline |
| Commonwealth Bank |
| 8Common |
Commonwealth Bank and 8Common Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and 8Common
The main advantage of trading using opposite Commonwealth Bank and 8Common positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, 8Common 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 8Common will offset losses from the drop in 8Common's long position.| Commonwealth Bank vs. Qbe Insurance Group | Commonwealth Bank vs. EMvision Medical Devices | Commonwealth Bank vs. Land Homes Group | Commonwealth Bank vs. ABACUS STORAGE KING |
| 8Common vs. Westpac Banking | 8Common vs. Qbe Insurance Group | 8Common vs. Wt Financial Group | 8Common vs. Macquarie Bank Limited |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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