Correlation Between Commonwealth Bank and ANZ Group
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and ANZ Group 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 ANZ Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank and ANZ Group Holdings, you can compare the effects of market volatilities on Commonwealth Bank and ANZ Group 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 ANZ Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and ANZ Group.
Diversification Opportunities for Commonwealth Bank and ANZ Group
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Commonwealth and ANZ is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank and ANZ Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANZ Group Holdings 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 ANZ Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANZ Group Holdings has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and ANZ Group go up and down completely randomly.
Pair Corralation between Commonwealth Bank and ANZ Group
Assuming the 90 days trading horizon Commonwealth Bank is expected to generate 2.6 times more return on investment than ANZ Group. However, Commonwealth Bank is 2.6 times more volatile than ANZ Group Holdings. It trades about 0.13 of its potential returns per unit of risk. ANZ Group Holdings is currently generating about 0.06 per unit of risk. If you would invest 9,146 in Commonwealth Bank on August 29, 2024 and sell it today you would earn a total of 6,300 from holding Commonwealth Bank or generate 68.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank vs. ANZ Group Holdings
Performance |
| Timeline |
| Commonwealth Bank |
| ANZ Group Holdings |
Commonwealth Bank and ANZ Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and ANZ Group
The main advantage of trading using opposite Commonwealth Bank and ANZ Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, ANZ Group 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 ANZ Group will offset losses from the drop in ANZ Group's long position.| Commonwealth Bank vs. National Australia Bank | Commonwealth Bank vs. National Australia Bank | Commonwealth Bank vs. Westpac Banking | Commonwealth Bank vs. National Australia Bank |
| ANZ Group vs. Australian Unity Office | ANZ Group vs. WiseTech Global Limited | ANZ Group vs. Ainsworth Game Technology | ANZ Group vs. EMvision Medical Devices |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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