Correlation Between Commonwealth Bank and Alternative Investment
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and Alternative Investment 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 Alternative Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and Alternative Investment Trust, you can compare the effects of market volatilities on Commonwealth Bank and Alternative Investment 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 Alternative Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and Alternative Investment.
Diversification Opportunities for Commonwealth Bank and Alternative Investment
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Commonwealth and Alternative is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and Alternative Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alternative Investment 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 Alternative Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alternative Investment has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and Alternative Investment go up and down completely randomly.
Pair Corralation between Commonwealth Bank and Alternative Investment
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 1.4 times less return on investment than Alternative Investment. But when comparing it to its historical volatility, Commonwealth Bank is 1.18 times less risky than Alternative Investment. It trades about 0.13 of its potential returns per unit of risk. Alternative Investment Trust is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 125.00 in Alternative Investment Trust on September 3, 2024 and sell it today you would earn a total of 19.00 from holding Alternative Investment Trust or generate 15.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. Alternative Investment Trust
Performance |
| Timeline |
| Commonwealth Bank |
| Alternative Investment |
Commonwealth Bank and Alternative Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and Alternative Investment
The main advantage of trading using opposite Commonwealth Bank and Alternative Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, Alternative Investment 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 Alternative Investment will offset losses from the drop in Alternative Investment's long position.| Commonwealth Bank vs. Alternative Investment Trust | Commonwealth Bank vs. Ora Banda Mining | Commonwealth Bank vs. Argo Investments | Commonwealth Bank vs. Talisman Mining |
| Alternative Investment vs. Audio Pixels Holdings | Alternative Investment vs. Iodm | Alternative Investment vs. Nsx | Alternative Investment vs. TTG Fintech |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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